Stock markets were rising on Monday, with a risk-on atmosphere dominating ahead of a key inflation reading in the US, due on Tuesday, though some analysts questioned whether the positive mood was warranted.
The pound and euro also were rising ahead of the data, which is expected to influence the next policy move by the US Federal Reserve.
The FTSE 100 index was up 96.90 points, or 1.3%, at 7,447.97 midday Monday. The mid-cap FTSE 250 index was up 231.79 points, or 1.2%, at 19,419.82. The AIM All-Share index was up 4.07 points, or 0.5%, at 884.67.
The Cboe UK 100 index was up 1.1% at 744.15. The Cboe 250 was up 1.3% at 16,743.32, and the Cboe Small Companies up 0.5% at 13,767.95.
In mainland Europe, the CAC 40 in Paris was up 1.3% while the DAX 40 in Frankfurt was up 1.6%.
Due on Tuesday, the US consumer price index reading is expected to show the annual US inflation rate softening to 8.1% in August from 8.5% in July, according to FXStreet.
Even though inflation is set to ease, expectations for the Federal Reserve's meeting next week remain elevated. Another 75 basis point interest rate hike is expected, taking the federal funds rate to a range of 3.00% to 3.25%.
The dollar was continuing to ease off a recent winning streak at the start of the week. Sterling was quoted at $1.1672 on Monday after the data, higher than $1.1580 at the London equities close on Friday.
This was despite some underwhelming UK GDP data.
The UK economy expanded 0.2% month-on-month in July, the Office for National Statistics said. This marked a recovery from June's 0.6% slide, but undershot market forecasts for 0.5% growth.
‘With business surveys suggesting that economic activity in August lost further momentum, and output in September now set to be hit by the period of mourning following the death of the Queen including the national holiday one week today, there is a good chance of a second successive modest drop of GDP in Q3 following the marginal fall of 0.1% Q/Q in Q2,’ said Daiwa Capital Markets.
The euro traded at $1.0135, up against $1.0003 late Friday. Versus the yen, the dollar was quoted at JP¥142.83, up from JP¥142.53.
Commenting on the dollar's reversal against the pound and euro, Brown Brothers Harriman said: ‘We view this current dollar sell-off as corrective in nature and maintain our strong dollar call. In our view, nothing has changed fundamentally and the global backdrop continues to favour the dollar and US assets in general.’
BBH added: ‘Its hard to see a reason for buying risk assets when the [European Central Bank] is adding to the global headwinds. With its 75 basis-point hike last week with more to come, this means global liquidity is being withdrawn even faster than before.’
Gold was quoted at $1,724.81 an ounce in London, rising from $1,715.81 on Friday. Brent oil was trading at $93.81 a barrel, up from $91.75 late Friday.
Futures are pointed to a positive start on Wall Street, with the Dow Jones called up 0.3%, the S&P 500 up 0.4%, and the tech-heavy Nasdaq Composite up 0.5%.
In London, retailers were among the top performers in the FTSE 100. Grocer J Sainsbury rose 4.4%, DIY retailer Kingfisher was up 4.3%, and athleisurewear seller JD Sports was up 3.9%.
The sector was benefiting from a positive read-across after JPMorgan placed supermarket chain Tesco and Portuguese retailer Jeronimo Martins on 'positive catalyst watch'.
Tesco shares were up 3.8%.
At the top of the FTSE 250 index was Ferrexpo, rallying 11% on news that Russian troops were withdrawing from key areas of Ukraine's Kharkiv region.
Ferrexpo produces iron ore in Ukraine.
Russian troops were also to withdraw from the city of Balakliya, which the Ukrainians had reported as having liberated last week.
President Volodymyr Zelensky on Saturday evening said that, since the beginning of the month, the Ukrainian army recaptured around 2,000 square kilometres of territory in areas previously occupied by Russia as part of Kiev's counter-offensive.
Towards the other end of the index was Serco, down 6.2%, following news that long-serving chief executive, Rupert Soames, is departing.
Soames intends to retire from the firm in September next year, at which point he will have served the outsourcer for over nine years. He will step down as CEO at the end of 2022 and will be succeeded by Mark Irwin, who is currently the CEO of Serco's UK & Europe division.
‘It has been the privilege of my working life to lead Serco for the last eight years, but it is now time for me to outsource myself,’ said Soames.
Tate & Lyle fell 4.1% on a downgrade to 'hold' from 'buy' at Jefferies.
On AIM, UK Oil & Gas fell 17% after raising £3.0 million in a discounted share placing.
The company said it has raised £3.0 million via a placing of 3.43 billion shares at a price of 0.0875 pence each. This represents a 20% discount to the closing price of 0.1098p per share on Friday, being the last business day before the announcement.
UK Oil & Gas said that the placing will provide general working capital and help deliver its near term goals of completing its Phase 2 Turkey seismic programme and the subsequent drilling of a new appraisal well in the Basur oil discovery. It expects this will add near-term oil production in the first half of 2023.
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