Housing stocks push FTSE 100 to a record close

On Wednesday, Britain’s FTSE 100 achieved a historic milestone, closing at an all-time high, driven partly by gains in housebuilder stocks fueled by expectations of an interest rate reduction. However, Burberry’s shares experienced a downturn following a significant drop in quarterly sales.

The blue-chip index rose by 0.2% to reach 8445.80 points at the close of trading. Earlier in the day, it hit an intraday record of 8474.71 points before retracting some of its gains.

Meanwhile, Wall Street’s S&P 500 also reached a new peak after data revealed that U.S. consumer prices rose less than anticipated in April. This data bolstered market expectations for an interest rate cut in September.

Daniela Hathorn, Senior Market Analyst at Capital.com, noted, “Today’s data definitely proves we’re back into the disinflation process. (It is) a sign of relief for markets and that’s why we’ve seen that initial risk appetite.”

Anticipation of monetary policy easing by major central banks, including the Federal Reserve, led to a decline in U.S. and UK bond yields. In fact, the 10-year gilt yield dropped to its lowest level since April 10.

Traders adjusted their expectations, with the likelihood of a rate cut by the Bank of England in June increasing to 56%, up from 50% prior to the data release.

The prospect of lower interest rates boosted UK equities sensitive to interest rates, such as housing and real estate investment trusts (REITs). The FTSE 350 index of housebuilders surged by 2.8% to reach a nearly three-month high, while REITs reached their highest point since January.

However, Burberry experienced a significant setback, with its shares falling by 7.3% after reporting a 12% decline in fourth-quarter like-for-like sales and a 34% drop in annual profits amid a broader slowdown in the luxury sector.

Other notable movements included Compass Group, which dropped by 3.0% as the catering group anticipated a moderation in volumes for the remainder of the year.

On a more positive note, credit data firm Experian saw an 8.1% increase in its stock price after forecasting annual organic revenue growth of between 6% and 8% for fiscal year 2025.

In the midcap segment, the FTSE 250 index climbed by 0.8% to its highest level in over two years.

International Distributions Services, the parent company of Royal Mail, surged by 16.0% following news of a potential 3.5 billion pound ($4.42 billion) takeover by Daniel Kretinsky, pending a formal offer.

Overall, the market exhibited a mix of optimism and caution, driven by evolving economic data and corporate performance.