The FTSE 100 closed at a new record high on a day of turbulent global markets as a stronger US dollar offset sharp declines in commodities such as gold, silver and oil.
London’s blue-chip index rose 118.02 points, or 1.15 percent, to 10,341.56, reversing an early sell-off in Europe and hitting a new closing high. Traders are betting that the dollar’s recent rally would improve the earnings outlook for U.K.-listed multinationals, about three-quarters of which generate revenue in dollars.
The session was marked by strong volatility across all asset classes:
Gold prices fell another 1.9 percent to $4,648.76 an ounce, their lowest close since mid-January and more than 13 percent below last week’s record high. Silver, which had risen sharply earlier this year, also fell 1.9 percent to $76.78 an ounce, more than a third below its recent peak.
Oil prices suffered their biggest daily decline in months. Brent crude fell 4.4 percent to $66.08 a barrel, its biggest decline since June last year, after Donald Trump signaled a possible easing of tensions with OPEC member Iran. Despite the decline, Brent remains around 9 percent higher since the beginning of the year.
Among digital assets, Bitcoin rose 1.8 percent to $78,282, but remains more than 30 percent below its intraday record high reached in October.
The renewed pressure on precious metals began late last week after Trump named Kevin Warsh as his preferred successor to Jerome Powell as Federal Reserve chair when Powell’s term ends in May.
Markets believe Warsh is more likely to resist political pressure to aggressively cut interest rates, easing concerns about the long-term credibility of U.S. monetary policy and dampening demand for traditional safe-haven assets such as gold.
Despite the sharp correction, many analysts argue that the sell-off in precious metals may have gone too far. Analysts at Jefferies said the longer-term backdrop still favors commodities, citing continued interest from investors and central banks in real assets amid global macroeconomic uncertainty.
Meanwhile, UBS, which forecast that gold could reach $6,200 an ounce this year, said the market appears to be in the “mid to late stages” of its current bull market, with declines of 5 to 8 percent expected at times.
The dollar index, which tracks the U.S. currency against a basket of euros and yen, rose nearly 0.5 percent on the day and is up 1.6 percent over the past week – a move that has helped underpin the FTSE 100’s record-breaking performance even as commodity markets cool.
