The FTSE 100 closed at an 18-month high on Wednesday, as stocks rallied around the world on stimulus hopes and easing inflation fears.
The FTSE 100 (^FTSE) rose 0.8% to close at 7,220, its highest finish since March 2020. The index remains around 200 points off levels it was trading at before the onset of the COVID-19 pandemic.
Global sentiment was helped by signs that US inflation could be topping out. Consumer price figures published 1.30pm Europe time showed US prices growing at 5.4% in July. That was flat on the prior month and broadly in line with forecasts.
"With US CPI having beaten expectation for most of 2021, it’s almost a surprise to see the numbers come out in line with expectations," said Mike Owens, a global sales trader at Saxo Market.
"It certainly appears that the market was set up for a beat as we’re seeing USD on the backfoot and bond yields fall back since the figures came out. We’ve had a predictably positive reaction from equity futures with growth and value stocks both taking something from the numbers, and the debate over whether this current bout of inflation is transitory will continue.”
Inflation data helped Wall Street to open higher but trading was mixed by the time European trade ended. The S&P 500 (^GSPC) was almost flat by the closing bell in London, the Dow Jones (^DJI) was half a percent higher, and the Nasdaq (^IXIC) fell 0.5%.
Both the Dow and the S&P 500 saw record closes on Tuesday, following the Senate's passing of US President Joe Biden's $1trn infrastructure bill. The bill must still pass through the House of Representatives but bipartisan approval from the Senate marks a key milestone in its passage. The size of the stimulus means its impact will be felt well beyond the boarders of the US if and when it is fully approved.
"There is a lot of optimism among investors and traders as the Senate passed the highly anticipated infrastructure bill, worth $1 trillion," said Naeem Aslam, chief market analyst at AvaTrade.
The Senate also approved a $3.5tn budget blueprint on Wednesday morning.
The move higher for stocks come despite jitters related to rising COVID-19 cases and worries about runaway inflation.
Earnings season continued in London. Insurer Admiral (ADM.L) rose 1.9% after announcing a 76% rise in profits and hiking its interim dividend by 63% to 115p per share. Troubled doorstep lender Provident Financial (PFG.L) rose 0.8% on signs that its self-help measures may be working. Shares in money manager Quilter (QLT.L) fell 3.1% despite a rise in profits and net asset inflows.
Watch: What is inflation and why is it important?