The stocks behind FTSE 100’s latest record rally

A fresh record on the back of strong sessions by AstraZeneca (LSE:AZN) and Anglo American (LSE:AAL) today kept the UK’s FTSE 100 index among the world’s hottest benchmarks of 2025.

This year’s rise of 7.2%, which is only bettered by the French, German and Swiss exchanges, already exceeds the 5.7% improvement recorded by London’s top flight across the whole of 2024.

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Most of the 2025 advance has come since 15 January, with a surge of 6.8% being well ahead of 3.7% for the S&P 500 index and 5.5% for the Dow Jones Industrial Average.

More than a quarter of FTSE 100 stocks are up by 10% or more in that period, led by St James's Place (LSE:STJ) and bookmaker Entain (LSE:ENT) after updates lifted shares by 30% and 22% respectively.

Banking stocks have extended their strong run of 2024, with Barclays (LSE:BARC) and NatWest Group (LSE:NWG) 14% higher on hopes this month’s results will feature significant shareholder returns and a robust 2025 outlook.

Lloyds Banking Group (LSE:LLOY) trailed the pair last year but is up 17% since mid-January amid signs that motor finance remediation costs might not be as bad as initially feared.

Resurgent airlines group International Consolidated Airlines Group SA (LSE:IAG) has kept up the strong pace of 2024 by lifting 18% in the year-to-date, while Games Workshop Group (LSE:GAW) has made a strong impression since joining the FTSE 100 index after adding 17% since mid-January.

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Housebuilders are also back in demand amid hopes that today’s interest rate cut by the Bank of England will be followed by at least three more in 2025.

The potential boost to mortgage affordability at a time when builders are still squeezed by elevated levels of cost inflation, helped Persimmon (LSE:PSN) improve by 15.6% and Barratt Redrow (LSE:BTRW) by 14.2% in the period since 15 January.

Today’s dovish policy announcement by the Bank of England helped extend the advance of the FTSE 100 index to a record 8,767, reflecting the benefit of a weaker pound for the benchmark’s significant number of overseas-earning stocks.

The encouraging start to the year for UK equities has been matched elsewhere as earnings progress and hopes for lower borrowing costs offset continued geopolitical uncertainty, particularly around a potential global trade war.

UBS said today that its base case remains that significant tariffs against Canada and Mexico are unlikely to be sustained for a prolonged period, and that the ratcheting up of the US’s effective tariff rate on China to 30% will be gradual.

While it believes that import levies should not derail global economic growth, the bank expects gold prices to stay at record levels in the near term. It raised its price target to $3,000 an ounce.

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In London’s mining sector, gold-focused Endeavour Mining (LSE:EDV) and Fresnillo (LSE:FRES) have outperformed after their shares rose 14.5% in the period since mid-January.

The earnings outlook has also offered encouragement after a strong reception to results and guidance statements by GSK (LSE:GSK), AstraZeneca and Shell (LSE:SHEL) among the UK’s early reporters.

In the US, where the earnings season is more advanced, the reported S&P 500 index earnings per share figure for the period up to last week was 5% above consensus. This was led by companies in the financial and communication services sectors.

Bank of America also noted that its corporate sentiment indicator, which uses natural language processing to track the comments of companies, is at a record high and pointing to a continued upcycle in earnings per share.

Mentions of “better” or “stronger” versus “worse” or “weaker” also jumped to the highest level since the end of 2021.