London stock market kicks off 2017 with record high

A trader from ETX Capital points to a Bloomberg terminal showing the FTSE 100 index in central London on June 27, 2016.
A trader from ETX Capital points to a Bloomberg terminal showing the FTSE 100 index in central London on June 27, 2016.PHOTO: AFP

LONDON (AFP) - World stock markets mostly rose Tuesday (Jan 3), with London reaching a new high early into its first session of 2017 and Wall Street resuming its push towards the 20,000 level.

Oil prices also powered ahead, while the dollar strengthened against its major peers.

"The New Year has started with a bang, at least in the case of the dollar, stocks and crude oil," said Fawad Razaqzada, an analyst at Forex.com.

London's FTSE 100 reached a historic peak at 7,205.21 points in morning trade, extending a record run seen in the final week of 2016, before easing back from its highs.

"2017 has kicked off in fine style for the FTSE 100, which broke to a new record high at the open," said Joshua Mahony, market analyst at IG trading group.

The FTSE remained in positive territory in mid-afternoon after a survey showed UK manufacturing hitting a 30-month high in December.

The Markit/CIPS manufacturing purchasing managers' index (PMI) climbed to 56.1 in December after easing to 53.6 in November.

It "provides further evidence that the sector's post-referendum weakness will prove short-lived", said Capital Economics analyst Ruth Gregory.

Since Britain's vote in favour of Brexit, London's FTSE 100 blue-chip index has soared thanks in large part to a weaker pound, even as the economy appears to have shrugged off the impact of the country's impending divorce from the European Union.

The Paris CAC 40 meanwhile struck a 13-month high above 4,900 points after data showed a slight pick-up in French inflation in December.

German inflation also rose, reaching its highest point in over three years. Analysts said the spike was mostly energy-related, but said it is also a sign of underlying strength in the eurozone's biggest economy.

On the Frankfurt exchange, financials rose on hopes that this may contribute to the European Central Bank phasing out its ultra-low rate monetary policy stance which has been hurting banks' margins.

Industrial stocks, however, ran into profit-taking after Monday's strong run, pushing the DAX index into slightly weaker territory.

Elsewhere Tuesday, most Asian markets were higher on their first trading day of the year.

Chinese stocks finished solidly higher after an independent research firm showed manufacturing activity expanded in December at its quickest pace in nearly four years, a sign of improving health for the world's second-largest economy.

Markets in Japan were closed for the final day of an extended New Year holiday.

On currency markets, the dollar advanced and was projected to continue its climb over the longer term, on expectations of more US interest rate rises this year and Donald Trump's inauguration as US president.

"The US dollar should remain strong in 2017. Growth and inflation in the US will be the strongest amongst the G3 economies (US, Japan and the EU)," Singapore's DBS Bank said in a note.

"We expect the Fed to hike four times this year whilst the eurozone and Japan maintain their quantitative easing (stimulus) policies," it added.

Also Tuesday, oil prices struck fresh 18-month highs as an agreement by major producers to cut output took effect.

Opec members led by Saudi Arabia and non-Opec producers like Russia agreed late last year to slash output to try and shore up prices weighed down by an oversupply since mid-2014.