Global equities jumped on Tuesday, with investors hopeful that central banks across the globe will follow the lead of the Reserve Bank of Australia and slow the pace of rate hikes.
The FTSE 100 index closed up 177.70 points, or 2.6% at 7,086.46 on Tuesday. The FTSE 250 ended up 537.27 points, or 3.1%, at 17,822.15. The AIM All-Share closed up 11.11 points, or 1.4%, at 819.84.
The Cboe UK 100 ended up 2.6% at 707.85, the Cboe UK 250 closed up 2.8% at 15,209.26, and the Cboe Small Companies ended up 2.6% at 12,368.03.
The RBA hiked by 25 basis points on Tuesday, instead of the 50bp lifts it enacted in its previous four meetings. FXStreet-cited consensus had been expecting rates to increase to 2.85%.
Among the central banks that investors hope will rein in rate hikes is the US Federal Reserve. The Fed has enacted three 75 basis point rate hikes in succession.
Hopes that it may slow the pace of hikes could take a hit if Friday's nonfarm payrolls report comes in hotter than expected.
The pound was quoted at $1.1438 at the London equities close Tuesday, up sharply from $1.1309 at the close on Monday.
Away from central banks, UK Prime Minister Liz Truss stressed she must take a ‘responsible’ approach to the public finances, as she faces a Cabinet split and a fresh battle with Tory rebels fighting real-terms cuts to benefits.
Truss is refusing to rule out a return to austerity or say whether welfare payments will be increased in line with soaring inflation.
This comes after critics forced a U-turn over the plan to abolish the 45 pence tax rate for top earners. They are now stepping up pressure on the government to confirm benefits will be raised.
The tax plan, proposed in Chancellor Kwasi Kwarteng's 'mini-budget' last week, had sent the pound plunging. Since the U-turn on Monday, sterling has seen a sharp recovery.
Kwarteng had been planning to wait until November 23 to publish his medium-term fiscal plan but it is understood he will publish them later this month after he told the Tory party conference in Birmingham he will set out more ‘shortly’.
In the FTSE 100, Hargreaves Lansdown closed up 7.3% as Jefferies raised the financial services firm to 'hold' from 'underperform'.
In the FTSE 250, Greggs soared 10%. The Newcastle-based food-to-go seller reported higher sales, citing ‘staycations’ as it bet on a new autumn menu and more vegan options for further growth.
Greggs said total sales were up 15% for the 13 weeks to October 1, as it backed its full year expectations.
Looking ahead, Greggs expects cost inflation for 2022 to remain at around 9% on a like-for-like level. ‘We also hold significant energy cover for the first quarter of 2023, with average costs expected to be below the level of the recently-announced price cap,’ the firm added.
Elsewhere, Royal Mail changed its name to International Distributions Services. Shares in the company ended 4.1% higher.
In July, the firm said the move would reflect the importance of its GLS distribution unit, which the company said it has become ‘increasingly’ reliant on.
The Royal Mail division is its UK-focused one, delivering letters and parcels, and includes Parcelforce Worldwide. GLS is its international operation, based in Oude Meer, Netherlands and working across the US, Canada and Europe.
Made.com jumped 40%, 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.
On AIM, Character Group dropped 5.9% as the toy, games, and gifts manufacturer acknowledged that the cost of living crisis and weak sterling have become a concern.
Character now expects that trading in its current financial year will be ‘unlikely’ to match the expected outcome for financial year 2022. It noted that the weak sterling paired with concerns over cost-of-living increases are likely to curtail spending in the lead up to Christmas.
In European equities on Tuesday, the CAC 40 in Paris jumped 4.2%, while the DAX 40 in Frankfurt surged 3.8%.
Factory gate inflation in the eurozone picked up the pace in August, according to new figures from the EU's statistical office.
Eurostat said producer price inflation hit 43.3% in the eurozone on an annual basis, compared to 38% in July.
The euro stood at $0.9970 at the European equities close Tuesday, higher against $0.9834 at the same time on Monday.
Against the yen, the dollar was trading at JP¥144.40 late Tuesday, a touch higher compared to JP¥144.35 late Monday.
Stocks in New York were sharply higher at the London equities close, with the Dow Jones Industrial Average up 2.6%, the S&P 500 index up 2.8%, and the Nasdaq Composite up 3.3%.
Brent oil was quoted at $91.77 a barrel at the London equities close Tuesday, up from $88.30 late Monday.
Gold was quoted at $1,725.92 an ounce at the London equities close Tuesday, sharply higher against $1,690.38 at the close on Monday.
In Wednesday's UK corporate calendar, supermarket chain Tesco will publish half year results.
In the economic calendar, there's a services PMI reading from the EU at 0900 BST before the UK at 0930 BST and the US at 1445 BST.
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