UK Stocks Closing : Britain’s leading share index hit a six-week high on Tuesday on growing hopes for concerted economic stimulus measures from central banks, with a fall in UK inflation seen as increasing the chances of another Bank of England move.
British consumer price inflation (CPI) eased unexpectedly in May to its lowest in two and a half years due to slower price rises for food and fuel.
A faster than expected decline in UK inflation last month … is largely being interpreted by the market as giving the Bank of England space for additional asset purchases beyond the 325 billion pounds already announced, said Joshua Raymond, Chief Market Strategist at City Index.
Heavyweight energy stocks, miners and banks were the top performing blue chip sectors, lending their strength to the index as investors bought on hopes of a liquidity boost.
Drugmakers were also in demand. AstraZeneca gained 2.9 percent as broker Liberum Capital suggested a merger of equals with AbbVie, due to be spun off from parent Abbott Laboratories, could generate some $4 billion of synergies and create $50 billion of value.
The FTSE 100 index closed up 95.22 points, or 1.7 percent at 5,586.31, just below the 5,600 level which was breached briefly late afternoon for the first time since he start of May.
Investors were also betting on hopes that a U.S. Federal Reserve policy meeting will sanction fresh stimulus measures, with U.S blue chips ahead 0.9 percent by London’s close.
The Federal Open Market Committee began the first day of a two-day meeting on interest rate policy on Tuesday, with expectations growing that the U.S. central bank may extend its Operation Twist programme in its effort to drive down long-term borrowing costs.
Tuesday’s mixed U.S. economic data added to these hopes, with housing starts falling 4.8 percent in May but permits to build rising to the highest level in over three years, as the housing market continues to struggle to return to health.
With the Fed more likely to act against a stalling U.S. recovery, today’s (housing) numbers provide in part the legitimacy required to consider making stimulus bets, said David White, Trader at Spreadex Ltd.
Global stocks and other risk assets are rising in spite of an increasingly troublesome environment, helping illustrate just how poor sentiment has been. Indeed, if stocks are rallying without a significant rerating to outlook, clues can be seen as to just how unloved stocks have become. Stimulus might help to underpin prices near-term, White added.
COFFEE HEAVEN
Whitbread topped the FTSE 100 leader board, up 6.4 percent after the leisure group reported solid growth in first-quarter sales, boosted by a strong performance from its coffee shop chain, Costa Coffee.
Among the minority blue chip fallers, food producers were under pressure, with ingredients group Tate & Lyle down 1.3 percent and AB Foods off 0.4 percent, after French firm Danone issued a profit warning. Danone shares dropped 6 percent in Paris.
Danone blamed the worsening economic climate in Europe, and several traders said they might still use brief rallies in the FTSE as an opportunity to take quick profits on stocks due to worries over the situation in Greece and Spain.
Weakness on a read-across from a European company also impacted testing and inspection services firm Intertek Group , down 0.9 percent, after the chief executive of Switzerland’s SGS was quoted as saying the company had to pare back its sales target due to the strong Swiss franc.
SGS shares in Zurich fell 0.5 percent. An SGS spokesman said the CEO’s comments were not new, noting that the target had been set two years ago.
