FTSE 100’s record attempt falls short

It’s been a big week for financial assets, both traditional and the new. One moment markets are threatening a correction, the next the FTSE 100 is within 20 points of a record high. For bitcoin, the volatility is quite breath-taking and momentum seemingly unstoppable.

A week ago, stronger than expected UK GDP put a rocket under the pound and a big dampener on demand for blue-chip equities which make a huge slug of earnings in overseas currencies.

On Thursday, the Bank of England duly delivered a well telegraphed 25 basis-point hike in interest rates, the first here for over 10 years. Yes, the move was already priced in, but one might have expected sterling to react positively.

Not this time. The accompanying statement was dovish. Gone were the warnings that rates may rise more quickly than markets currently expect. Instead, the Bank says: “All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.” Sterling fell sharply and domestic stockmarkets flew.

The euphoria spilled over into Friday, sending the FTSE 100 as high as 7,580, its best level since the record was set in early June.

Most stocks did well, although disappointment that rates are unlikely to rise again until late next year, at the earliest, hit banks which typically see margins improve when borrowing costs increase. Lloyds Banking Group (LLOY), Royal Bank of Scotland (RBS) and Barclays (BARC) turned tail.

And, while the rate rise is very modest, expectation of some impact on the housebuilding sector triggered profit taking at Taylor Wimpey (TW.), Persimmon (PSN) and Barratt Developments (BDEV) following a strong run in recent months.

Disappointing US non-farm payrolls data out Friday also hurt the dollar, and sterling’s partial recovery from Thursday’s rout has taken the shine of the blue-chip index.

Elsewhere, in the world of cryptocurrencies, bitcoin continues to defy gravity and belief, certainly among more traditional investors.

That we’re even discussing bitcoin as a credible asset would have been unthinkable a year ago. Think what you like, but in that time its value has risen more than 1,000%!

At just under $7,500, bitcoin is racing toward the much-discussed target of $10,000. It seems crazy, but its rise is relentless, and even doubters must begrudgingly accept this rally may not yet be over.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.