FTSE touches record high but lags global equity rally

Britain's FTSE 100 hit its highest level ever at 7,632.71 points, slightly topping the previous record high hit last week, before paring some gains and ending up 0.37 percent. The mid cap index also surged to a new record high, boosted by IWG's rally. It rose 0.78 percent.

LONDON: A rise in oil majors helped pushed the UK's top share index to an all-time high on Thursday but below the level enjoyed by its European peers, as retailers hurt after a Debenhams profit warning and house prices weighed on the real estate sector.

Britain's FTSE 100 index closed up 0.3 percent at 7,696.50 after hitting a record of 7702.11 points after surveys showed Britain's dominant services sector rebounded strongly last month.

The data pushed sterling slightly higher, keeping pressure on earners of dollars.

A rally in cyclical sectors such as financials and energy added about 22 points to the index, with BP and Shell rising 1.1 percent and one percent respectively.

The UK's oil and gas index <.FTNMX0530> was up one percent at its highest level since May 2008.

The British oil majors mirrored a move higher in oil prices, which were spurred to their highest since mid-2015 on the back of tensions in producer Iran.

A supportive research note from Barclays also helped the energy sector, in which analysts said they expected European integrated oil and refining companies to be cash flow positive after dividends in the fourth quarter, thanks to a higher oil price.

Likewise positive metals prices also drove shares in British miners. Shares in Glencore , Anglo American and BHP Billiton rose between 0.3 percent to 1.4 percent.

The mood was less positive among retail stocks, however, as shares in small cap Debenhams closed down 17.7 percent after a profit warning following a difficult Christmas trading period.

This contrasted with Next's upbeat update on Christmas sales on Wednesday.

Shares in Debenhams posted their biggest one-day loss since March 2008, while blue chip Marks & Spencer was also down 3.6 percent at the bottom of the FTSE.

"Ongoing structural challenges, a soft consumer environment, rising costs and increasing capex demands make for a difficult outlook (for Debenhams)," analysts at Liberum said in a note.

The real estate sector also suffered after data showed British house prices grew last year at their slowest since 2012 and fell in London for the first time in a full year since 2009.

British Land Company fell 3 percent and Hammerson 2.5 percent.

Separately, China's services sector activity hit its highest in more than three years and manufacturing data from Japan came in strong. Services PMI data also showed the euro area was close to its strongest growth in seven years, confirming a strengthening economy was boosting corporate activity.

The euro zone's STOXX 50 <.STOXX50E> had its best day since April 2017, closing up 1.68 percent. London's FTSE <.FTSE> set a record high on Thursday, up 0.32 percent, while Tokyo's Nikkei <.N225>, Asia's biggest market, had earlier shot to its highest since 1992 and was up 3.26 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> closed up 0.52 percent, scaling a decade-high peak as a fifth day of gains in China helped emerging market stocks <.MSCIEF> to a six-and-a-half-year high.

Those gains come after Wednesday's release of the minutes from the Federal Reserve's mid-December meeting that did little to change a view that it will stick to measured increases in U.S. interest rates.

The minutes showed policymakers expect U.S. President Donald Trump's tax overhaul will boost consumer spending but are still uncertain about the wider impact the stimulus would have on factors such as inflation.

EURO RALLIES

The euro resumed a rally that has taken it to near its highest in three years, while the U.S. dollar index, which measures the greenback against a basket of other major currencies, failed to hold gains from the previous session after upbeat U.S. data and the Fed minutes.

The euro rose 0.47 percent to $1.2069, while the dollar index <.DXY> was down 0.33 percent.

On Friday, investors will be focused on the U.S. nonfarm payrolls report, which is expected to show job gains of 190,000 for December.

James Chen, head of FX research at Forex.com in Bedminster, New Jersey, said his firm's U.S. payrolls growth forecast is between 200,000 and 220,000 given the strong employment data in other economic indicators.

"Any result falling within or above this range is likely to give the U.S. dollar a boost, as it would help confirm the Fed's optimistic outlook for the economy and the path to higher interest rates in 2018," Chen said.

The Japanese yen weakened 0.21 percent versus the greenback to 112.74 per dollar , while sterling was last trading at $1.3551, up 0.27 percent.

Benchmark 10-year notes was last down 2/32 in price to yield 2.4525 percent, from 2.445 percent late on Wednesday. The 30-year bond was last down 1/32 to yield 2.7847 percent, from 2.783 percent.

U.S. Treasury two-year yields earlier hit a more than nine-year peak, boosted by the stronger-than-forecast ADP report on private hiring.

Yields were tempered by concerns that wage growth may fall short of expectations.

Oil rose above $68 a barrel to its highest since May 2015 on Thursday after unrest in Iran sparked concerns about supply risks and with support coming from another fall in U.S. inventories as refining hit a 12-year high.

U.S. crude rose 0.44 percent to $61.90 per barrel and Brent was last at $67.97, up 0.19 percent. - Reuters