FTSE moves closer to all-time high

The FTSE moved close to an all-time high as it rose 36 points to 6840
22 May 2013

The FTSE 100 Index moved closer to an all-time high amid signs that central banks will continue to prop up the global economy with vast stimulus injections.

The London market rose 36.4 points to its second-highest ever close of 6840.3, as the US Federal Reserve said it was too soon to rein in its massive money-printing drive. The only time the FTSE 100 has closed higher was in December 1999, when the dotcom boom drove the top tier to a record finish of 6930.2 points.

That also sent global stock markets soaring in the US and Europe, as investors continued to be driven out of low-yielding government debt and into shares.

US Federal Reserve chairman Ben Bernanke said it was too early for the central bank to wind up its quantitative easing (QE) drive - buying 85 billion dollars (£56 billion) of debt a month - and doing so would risk derailing recovery in the world's biggest economy.

Andy McLevey, head of dealing at stockbroker Interactive Investor, said: "Given Ben Bernanke is evidently no closer to calling an end to the US QE programme, it would seem likely that the upward trend can remain intact over the coming days."

But markets were held back from further gains when Mr Bernanke added the Fed could taper asset purchases in the next few months.

Craig Erlam, market analyst at Alpari said Mr Bernanke's comments "sent financial markets crazy", and would ensure they remained "extremely sensitive" to further clues over economic stimulus. The Bank of England and Bank of Japan have also been buying government debt to inflate economic growth.

The Bank of England kept its £375 billion QE drive steady earlier this month amid signs a recovery was in sight. But minutes showed outgoing governor Sir Mervyn King and two other members of its Monetary Policy Committee still want to pump another £25 billion into the economy to spur anaemic growth.

While the FTSE is closing in on its record high, Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, warned it was not a simple comparison with 1999.

He said: "Beware the apples and pears comparison. The index is simply a straight line, in that it does not include dividend yields. The current index level is without nearly 14 years of dividend growth. Secondly, the FTSE 100 is reshuffled on a quarterly basis and so today's FTSE 100 looks almost totally different to the one of December 1999."

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