Stocks soared amid investor hopes that global inflation may be peaking and that central banks could be nearing the end of interest rate hikes.

However, the index fell sharply on opening today (Monday), pulling back 0.6% to 7,856. This was after the US downed an alleged Chinese spy balloon, putting a strain on US-China relations, and raising concerns about geopolitical instability.

Plus, a strong US jobs report on Friday indicated that the Federal Reserve may have to raise interest rates further, pressurising global equity markets.

Russ Mould, investment director at AJ Bell, said: “Ongoing strength in the labour market theoretically reduces the chances of the central bank taking its foot off the pedal when it comes to rate rises. Markets are desperate for the rate hike cycle to end, and anticipation around this pivot coming soon is a key reason why equities have done so well in the past month or so.”

Victoria Scholar, head of investment at interactive investor, said: “Most FTSE 100 stocks are in the red but safe-haven play, silver miner Fresnillo is outperforming alongside Lloyds and HSBC which benefit from more hawkish monetary policy. BP is also in the green on the back of rising oil prices. China sensitive stocks like Prudential and Burberry are trading near the bottom of the FTSE 100.

“The FTSE 100 closed at a record high on Friday driven by expectations of a dovish tilt from the Bank of England, a weaker pound after a very strong US jobs report and its favourable sectoral mix which provided a tailwind to the index over the last year. Its lack of tech heavyweights allowed the FTSE 100 to avoid last year’s ‘tech wreck’ and a high amount of oil and mining giants benefited from 2022’s commodity boom. Plus, banks like Standard Chartered have logged strong share price performances on the back of the rising rate environment.

“So far in 2023, the FTSE 100 is up by just over 5% versus the DAX, CAC and FTSE MIB which have logged double-digit percentage recoveries.”