The FTSE 100 posted another record closing peak on Friday as Jerome Powell said shifting economic risks may justify an interest rate cut in the US.
The FTSE 100 index closed up 12.20 points, 0.1%, at 9,321.40. It earlier traded as high as 9,357.51.
The FTSE 250 ended up 259.39 points, 1.2%, at 22,077.23 and the AIM All-Share finished 6.17 points higher, 0.8%, at 765.03.
For the week, the FTSE 100 rose 2.0%, the FTSE 250 advanced 1.5% and the AIM All-Share climbed 0.6%.
In a keenly awaited speech, Federal Reserve chairman Jerome Powell left the door open to an interest rate cut at its September meeting, noting a “shifting” balance of economic risks may warrant such a move.
Speaking at the Jackson Hole economic symposium, Mr Powell said: “The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
But he added “the stability of the unemployment rate and other labour market measures allow us to proceed carefully as we consider changes to our policy stance”.
Padhraic Garvey at ING commented: “Chair Powell could have been super balanced, or even hawkish. But he effectively chose to endorse the market discount for a rate-cutting phase ahead. It’s had quite the reaction. Risk assets are up, the dollar down.”
In New York, the Dow Jones Industrial Average soared 2.0%, as did the Nasdaq Composite, while the S&P 500 jumped 1.6%.
On the labour market, the Fed chairman said while it “appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising”.
On tariffs, Mr Powell said a “reasonable base case” is that they create a “one-time” shift up in the price level, although he added those effects will take time to fully work their way into the economy.
“In the near-term, risks to inflation are tilted to the upside, and risks to employment to the downside – a challenging situation,” Mr Powell said.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he added.
While stocks rose, the dollar fell, while US bond yields declined.
The pound jumped to 1.3539 US dollars late on Friday in London, compared to 1.3426 US dollars at the equities close on Thursday.
The euro firmed to 1.1726 US dollars, higher against 1.1619 US dollars. Against the yen, the dollar was trading lower at 146.61 yen compared to 148.21 yen.
In Europe, the CAC 40 in Paris ended up 0.5%, while the DAX 40 in Frankfurt closed up 0.3%.
The yield on the US 10-year Treasury was at 4.26%, narrowed from 4.34%. The yield on the US 30-year Treasury was 4.87%, trimmed from 4.94%.
In London, trading recovered from a sluggish start supported by news that UK consumer confidence improved in August, boosted by the latest interest rate cut, although uncertainty over the possibility of future tax hikes and inflationary pressures weighed on expectations going forward.
The GfK consumer confidence index rose to minus 17 in August from minus 19 in July, above the FXStreet-cited consensus forecast of minus 20.
Consumer expectations for their personal financial situation over the next 12 months rose to plus 5 in August from plus 2 in July, while expectations for the general economic situation over the next 12 months declined to minus 30 from minus 29.
Neil Bellamy, consumer insights director at GfK, said: “The biggest changes in August are in confidence in personal finances, with the scores looking back and ahead a year each up by three points.
“This is likely due to the Bank of England’s August 7 cut in interest rates, delivering the lowest cost of borrowing for more than two years.”
AJ Bell investment analyst Dan Coatsworth said the slight uptick is “good news” for retailers, hospitality and travel businesses, but “no-one will be getting carried away given this is just a case of people feeling a bit less bad rather than genuinely optimistic about the economic outlook”.
On the FTSE 100, gains were broad-based with Asian-focused bank Standard Chartered leading the way, up 4.2%, while housebuilders Persimmon and Berkeley climbed 2.3% and 2.2% respectively, and British Airways owner, IAG, added 2.3%.
On the FTSE 250, WH Smith rallied 11%, recouping a small slice of Thursday’s dramatic 42% fall in the wake of lowered guidance after an accounting error.
Morgan Advanced Minerals rose 3.6% after Vesuvius agreed to buy its Molten Metal Systems business for a total enterprise value of £92.7 million.
In addition, the England-based manufacturer of carbon and ceramic materials, said it has instructed Investec Bank to launch the third tranche of its ongoing share buyback immediately upon completion of the second tranche.
Each tranche to date has been for up to £10 million, under a total buyback programme for up to £40 million.
Revolution Beauty leapt 20% as it announced the return of its co-founders to the business after terminating its formal sales process.
The news came as the firm pledged to slash costs amid declining sales and profitability, and raised £15 million via a placing and subscription.
This includes cornerstone investment from the make-up brands co-founders, Tom Allsworth and Adam Minto, and from its largest shareholder, boohoo, now trading as Debenhams.
Between them the cornerstone investors hold just under 58% of Revolution Beauty stock, with boohoo having a 27% stake.
Mr Allsworth will step in as chief executive over the “coming days”, the firm said, with Colin Henry stepping down as interim chief executive at that point, while Mr Minto will also return to the business in a consulting capacity.
A barrel of Brent traded at 67.59 US dollars late Friday, up from 67.13 US dollars on Thursday. Gold pushed up to 3,375.22 US dollars an ounce against 3,343.46 US dollars.
The biggest risers on the FTSE 100 were Standard Chartered, up 57.0 pence at 1,417.0p, Persimmon, up 25.5p at 1,128.5p, International Consolidated Airlines, up 8.8p at 394.5p, Scottish Mortgage Trust, up 24.0p at 1,095.0p and Berkeley Group, up 80.0p at 3,792.0p.
The biggest fallers on the FTSE 100 were British American Tobacco, down 78.0p at 4,315.0p, Coca-Cola Europacific down 120.0 pence at 6,710.0p, Coca-Cola HBC, down 52.0p at 3,892.0p, Tesco, down 5.2p at 426.3p and National Grid, down 10.5p at 1,049.0p.
Financial markets in London are closed on Monday for the August bank holiday.
Later in the week results are due from insurer Prudential and sports retailer JD Sports Fashion.
The global economic calendar on Monday has the German ifo business climate report and US new home sales figures.
Contributed by Alliance News.
