Stocks in London were up more than 2% in midday trade on Tuesday, but was still behind European peers, as the mood was lifted with investors now hoping central banks will slow down the rate of interest rate hikes.
Declining PMIs on Monday offered hope that the US Federal Reserve and its global counterparts will rein in rate hikes to support weakening economies.
The Reserve Bank of Australia was the first to bite the bullet. The central bank hiked by 25 basis points on Tuesday, following four 50bp rises on-the-trot.
The FTSE 100 index surged 141.82 points, 2.1%, at 7,050.58. The FTSE 250 jumped 484.63 points, 2.8%, at 17,769.51 and the AIM All-Share traded 6.02 points, 0.7%, higher at 814.75.
The Cboe UK 100 jumped 2.2% at 704.91, the Cboe UK 250 surged 2.8% to 15,205.76, and the Cboe Small Companies climbed 0.7% to 12,829.84.
While gains in London were sizeable, peers in Europe jumped even further.
The CAC 40 in Paris skyrocketed 3.5%, while the DAX 40 in Frankfurt jumped 3.1%.
Markets are beginning to contain their Fed hike expectations.
According to the CME FedWatch Tool, which tracks the latest probability of Fed policy decisions, there is a 59% chance of another 75 basis point hike when the central bank next meets at the start of November. This had stood at 63% a week earlier.
The same tracker shows a just over a 50% chance a year-end federal funds rate range of 4.00% to 4.25%, compared with 60% a week ago. The Fed's rate range is currently 3.00% to 3.25%.
The Institute for Supply Management's manufacturing PMI on Monday weakened to 50.9 points for September, just above the 50.0 neutral mark, from 52.8 in August.
The dollar faded against the euro and pound, as currency traders weight up the prospect of slower Federal Reserve rate hikes.
The pound was quoted at $1.1350 early Tuesday afternoon, rising from $1.1309 at the close on Monday. It had hit an intraday high above the $1.14 mark.
Sterling stretched further above the depths it sunk to last week, as markets digested the now infamous 'mini-budget'. It had fallen to just above the $1.03 mark early last week.
The euro stood at $0.9894 midday Tuesday UK time, up against $0.9834 at the London equities close on Monday. Against the yen, the dollar was trading at JP¥144.74, higher from JP¥144.35.
Brent oil was quoted at $89.69 a barrel midday Tuesday, up from $88.30 late Monday.
Oil has this week been boosted by chatter of the OPEC+ cartel mulling output cuts. They are expected to be the largest oil production cuts since the start of Covid-19.
In London, Legal & General added 5.8%. The financial services firm said it has maintained positive momentum from the first half into the second, ‘despite market volatility’, which has had a ‘limited economic impact’ on the firm.
L&G said it expects to deliver annual operating profit growth in line with the 8% seen in the first half.
It said recent ‘extraordinary’ interest rate hikes have been challenging for its pension fund clients and counterparties of its Investment Management liability-driven investment business. However, recent purchases of long-dated gilts by the Bank of England have helped to soothe the pressure.
Just Group surged 9.5% in a positive read across. It was among the best FTSE 250 performers.
Greggs also rose to the top of the FTSE 250, adding 9.5%. The pastry chain's sales jumped 15% during the 13 weeks to October 1, and backed its full-year expectations.
‘As expected, year-on-year growth moderated in August given the particularly strong 'staycation' effect seen in 2021, however, momentum returned in September. We closed our shops on September 19 for the funeral of Her Majesty The Queen and this impacted reported LFL sales growth for the third quarter by around one percentage point,’ the food-to-go seller noted.
It acknowledged ‘considerable’ economic uncertainty, but expects full-year results to be in line with previous expectations.
Made.com jumped 24%, on news the sofa seller is in buyout talks, potentially drawing a torrid stint on the London Stock Exchange to a close.
In September, Made.com announced that it would conduct a formal review of strategic options, as it continued to grapple with tumbling demand amid cost-of-living pressures. The options include a sale process or a strategic investment.
On Tuesday, the company said it has begun discussions with a number of interested parties regarding its sale.
It explained that these parties will be invited to put forward non-binding indicative proposals in the middle of October. Made.com's board will then review these proposals and it expects to select a number of parties to participate in a second phase to conclude its sale as soon as possible thereafter.
Shares were trading around 4.20 pence at midday, down 98% from its 200p float price back in June 2021.
Gold was quoted at $1,710.02 an ounce midday Tuesday, sharply higher against $1,690.38 at the close on Monday.
Ahead of the New York open, stocks are called higher. The Dow Jones Industrial Average is called up 1.6%, the S&P 500 up 1.9% and the Nasdaq Composite 2.3% higher.
Of market focus later this week is Friday's US nonfarm payrolls report. It is expected to show employment grew by 250,000 in September, slowing from 315,000 in August.
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