Britain’s top equity index gained nearly 1 percent on Wednesday, rebounding from a three-week low as euro zone consumer price data raised expectations of new stimulus from the European Central Bank.
The blue-chip FTSE 100 index, which had fallen in the last three sessions and hit its lowest since mid-December on Tuesday, finished 53.32 points, or 0.8 percent, higher at 6,419.83.
Data showing euro zone consumer prices fell more than predicted in December heightened expectations the ECB will announce a government bond-buying programme, or quantitative easing (QE), at its policy meeting later this month to try and revive prices and the euro zone economy, analysts said.
“(ECB President) Mario Draghi will find it very difficult to deny the euro zone is suffering from a fall in the cost of living at the ECB meeting later this month, and this could force him to fire up the printing press,” IG analyst David Madden said.
“Traders still can’t shake the looming political uncertainty in Greece but, for now, they are content to ride the QE gravy train.”
European stock markets have been choppy in the past days ahead of a Jan. 25 election in Greece. Investors are concerned that if the Syriza party leads the next government, then the risk of a sovereign default for Greece will increase and the country could leave the euro zone. Syriza has promised to end austerity and renegotiate the country’s debt.
Retail stocks remained volatile. Sainsbury’s rose more than 4 percent in early trading after reporting better-than-expected results in the Christmas quarter. But its shares closed down 2.1 percent on concern it might lose more market share to discounters and could suffer in an intensifying price war.
“Sainsbury’s numbers were better than expected, but I am not a buyer of the stock for now, as top line guidance remains unchanged,” said Securequity sales trader Jawaid Afsar.
Grocer Tesco, which posts an update on Thursday, gained 1.8 percent and Marks & Spencer rose 1.9 percent. WM Morrison shares, however, fell 1.3 percent.
Among other retailers, shares in the online fashion company Boohoo.com, which is not in the FTSE 100 index, slumped 42 percent after cutting its profit outlook.
Aggreko, which fell 12 percent in 2014, rose 3 percent. The world’s biggest temporary power provider raised its 2014 trading profit expectations following a debt settlement.