As Brits reel from a cost-of-living crisis, the UK stock market quietly booms to an all-time high

LONDON — The U.K. is facing the weakest maturation prospects successful the G-7 and a catalogue of cost-of-living pressures that are pushing the poorest into situation and intensely squeezing the budgets of middle-income households.

At the aforesaid time, much capitalist wealth has ne'er been pumped into the U.K.'s biggest companies. The FTSE 100 scale has smashed done 3 intraday records implicit the past week, starting past Friday and hitting caller heights successful Wednesday's and Thursday's sessions.

That's besides coming disconnected the backmost of a twelvemonth successful markets that was dominated by doom and gloom, with hazard assets selling disconnected and indexes from the pan-European Stoxx 600 to the U.S. S&P 500 to Shanghai's SSE Composite emerging bruised.

The astir caller uptick for the FTSE 100 shows that, arsenic good arsenic occurring contempt harsh cost-of-living pressures, they are besides linked to them.

Energy firms specified arsenic Shell and BP person reported grounds profits and promised higher shareholder dividends, boosting their stock prices (with calls for higher windfall taxes to enactment consumers struggling with higher bills doing small to dampen their appeal).

Thursday's FTSE ascent to an all-time precocious of 7,944 points astatine midday successful London was boosted by gains astatine Standard Chartered, 1 of galore banks that person seen profits leap arsenic a effect of higher involvement rates.

Meanwhile, the beardown show of commodity stocks has besides lifted the scale higher arsenic they person been boosted by a emergence successful prices, proviso constraints and, recently, the imaginable of China's Covid-19 reopening.

FTSE 100 chart.

"The U.K. FTSE 100 is not astir the U.K. home economy," said Janet Mui, caput of marketplace investigation astatine RBC Brewin Dolphin, noting implicit 80% of firms' firm gross vulnerability is derived from overseas.

Mui told CNBC a confluence of factors had taken the scale to a grounds high, including the plunge successful sterling helping those overseas revenues (collected successful dollars); its dense weighting successful energy, commodities and financials; and the comparatively beardown show excessively of antiaircraft staples successful user products — specified arsenic Unilever — and wellness attraction — specified arsenic AstraZeneca.

What the U.K. banal marketplace has often been criticized for — a deficiency of new, buzzy tech firms and preponderance of stalwarts of the "old economy" — has been a boon arsenic monetary and fiscal cycles person turned.

The wider FTSE 250 does person stronger home links but inactive has 50% of gross exposed to overseas, Mui added.

Susannah Streeter, elder concern and markets expert astatine Hargreaves Lansdown, said that among different factors, the FTSE's emergence could beryllium explained by glimmers of anticipation successful the economical picture, specified arsenic housebuilder Barratt reporting a "modest uplift" successful reservations of caller homes. She besides pointed to forward-looking signals of Europe avoiding a recession and an abating of the vigor crisis.

Banks would execute adjacent amended if their nett income margins amended but atrocious loans don't travel through, she noted.

Shell stock price.

Among the factors weighing connected the U.K. nationalist are interest complaint rises expanding borrowing costs, grocery terms inflation astatine a grounds precocious of 16.7% and overall inflation supra 10%.

A report published Wednesday by the National Institute of Economic and Social Research argued the U.K. was apt to debar a method recession this twelvemonth — though maturation would beryllium adjacent zero — but that 1 successful 4 households volition beryllium incapable to afloat wage their vigor and nutrient bills, and middle-income households volition look up to a £4,000 ($4,873) driblet successful disposable income.

And the disjunct betwixt banal marketplace gains and the dire outlook inactive facing galore households jars for many.

"It is simply a cruel paradox that connected the time that the FTSE 100 scale deed a grounds high, campaigners connected behalf of up to 7 cardinal radical connected little incomes successful the UK were calling for the government to widen the enactment provided to them with regard to their vigor bills," Richard Murphy, professor of accounting signifier astatine Sheffield University Management School, told CNBC.

In March, the U.K. authorities is acceptable to extremity a wide household vigor measure compensation programme that has tally done the winter. It comes arsenic galore governments effort to upwind down fiscal enactment to rein successful nationalist spending, with the European Central Bank precocious arguing that maintaining enactment packages risks maintaining inflation.

But Murphy said that without the support, and with bills inactive elevated, "many volition not beryllium capable to marque ends conscionable and volition spell hungry, acold oregon adjacent stateless arsenic a result."

"The representation that this provides of a state enormously divided by differing incomes and wealthiness is astir Victorian successful its starkness," said Murphy.