The FTSE 100 index closed at a record high on Thursday, completing its recovery from a sharp decline earlier in the year sparked by US President Donald Trump’s global trade war. The UK’s main equity benchmark rose 0.2 per cent to 8884.92, helped by gains on Wall Street following soft US inflation data and topping its previous closing record of 8871.31 set on March 3.

The index was caught up in a global stock market rout in early April after Trump’s “liberation day” tariff announcements, but has clawed its way back as the US president retreated from many of his most aggressive levies. The London market has been helped by investors cooling on US stocks, which are yet to return to their own record high because of Trump’s trade war and fears of a ballooning US deficit, analysts say.

Charles Hall, head of research at UK investment bank Peel Hunt, mentioned that investors have been allocating away from the US, leading Europe and the UK to benefit from this shift. The improving economy and stable political situation in the UK have been attractive to investors. Recent trade agreements with the US, EU, and India have also boosted sentiment.

As sentiment cools on US equities, investors are searching for cheaper alternatives, benefiting other markets. The FTSE 100's price/earnings ratio of 16.7 times is more attractive compared to the S&P 500’s 26.3 times. Trevor Greetham, multi-asset portfolio manager at Royal London Asset Management, highlighted the UK market’s lower valuations, diversification, and inflation resilience.

The FTSE 100 has risen 8.7 per cent this year despite initial setbacks from Trump’s tariffs, nearing its record intraday high. Emmanuel Cau, head of European equities strategy at Barclays, noted that the FTSE 100's composition has supported its growth this year, with a rotation back into laggards favoring the UK market.

London’s market includes many value stocks in sectors like financials, energy, and materials, which are outperforming amid the search for stability. Companies like Rolls-Royce and BAE Systems have seen significant share price increases this year. The pound’s rise against the dollar has also made the UK market more appealing to investors.