A favourable US inflation reading spurred on a bullish afternoon for European equities, amid the hope that the Federal Reserve may finally tone down the pace of its rate hikes.
The FTSE 100 index closed up 79.09 points, 1.1%, at 7,375.34. The FTSE 250 ended up 728.24 points, 3.9%, at 19,377.24, and the AIM All-Share closed up 1.8%, or 15.22 points, at 841.57.
The Cboe UK 100 ended up 1.3% at 739.22, the Cboe UK 250 closed up 3.9% at 16,715.65, and the Cboe Small Companies ended up 1.3% at 12,683.16.
At best, London's major indices were only marginally higher going into the inflation reading. That all changed after, however.
Equities in Europe were similarly upbeat, as the CAC 40 in Paris ended up 1.9%, while the DAX 40 in Frankfurt outperformed, jumping 3.6%.
US inflation slowed in October, the latest data from the US Bureau of Labor Statistics showed, falling short of market expectations.
The consumer price index rose 7.7% in October against the prior year, slowing from the 8.2% rise recorded in September. Market consensus, as cited by FXStreet, had expected for inflation to cool to 8.0% in October, so the actual figure came in shy of forecasts.
Against the previous month, consumer prices rose by 0.4% in October, unchanged from September and in-line with market consensus.
With the figure coming in below expectations, many will view the reading as a case for the US Federal Reserve to be less assertive and hike rates by 50 basis point or less in December. In each of the last four meetings, the Fed has turned to turbo-charged 75 basis point hikes.
According to CME's FedWatch tool, the probability of a 50 basis point hike in the Fed's December meeting now stands at 81%, compared to 57% on Wednesday.
Also adding fuel to hopes of a Fed pivot, data from the Department of Labor showed US jobless claims were up in the week ending November 5.
It said 225,000 new claims were made, a rise of 7,000 from the previous week's revised level which was increased to 218,000 from 217,000.
In the September minutes from the Federal Open Market Committee, policymakers had highlighted that a softening in the labour market would likely be necessary to reign in inflation.
However, AJ Bell's Danni Hewson cautioned: 'Whilst today's bad jobs news will be viewed by markets as good news, employment is still startlingly high for a country expecting a serious growth slowdown and that means competition for workers will keep wages elevated for at least the short term.'
Stocks in New York were surging at the London equities close, with the Dow Jones Industrial Average up 2.8%, the S&P 500 index adding 4.3%, and the Nasdaq Composite jumping 5.8%.
The dollar moved in the opposite direction, with the euro now somewhat comfortably above parity with the greenback and the pound even neared the $1.17 mark - hitting an intraday high of $1.1685. The last time cable topped $1.17 was on September 13, 10 days before the poorly-received UK government mini-budget announcement, which sparked mayhem in bond markets and saw the pound hit a record low.
The pound was quoted at $1.1661 at the time of the London equities close on Thursday, up sharply from $1.1416 at the London equities close on Wednesday. The euro traded at $1.0162, up from $1.0049. Against the yen, the dollar was trading at JP¥141.78, a steep fall from JP¥146.00 on Wednesday.
The lower dollar drove the price of gold higher. Gold was quoted at $1,745.45 an ounce, sharply higher against $1,713.97 at the London equities close on Wednesday.
In London, oil stocks BP, Shell and Harbour Energy shed 2.4%, 2.9% and 2.1% amid a weak demand outlook after China recommitted to its 'unswerving' zero-Covid policy.
The price of a barrel of Brent remained fairly steady, however, quoted at $93.90 late Thursday in London, up slightly from $93.74 late Wednesday. Brent did hit an intraday low of $91.70, however.
GSK consumer healthcare spin-off Haelon fell 2.8%.
For the third quarter of 2022, the Sensodyne and Panadol-owner reported revenue growth of 16% year-on-year to GPB2.89 billion from £2.49 billion.
Pretax profit, however, slipped to £495 million from £507 million. It blamed the dip on standalone costs and adverse foreign exchange rates, specifically related to the Swiss franc and US dollar strength.
GSK ended the day mostly unscathed, up 0.1%.
B&M European Value lost 4.5%, as it reported shrinking interim profit and a dip in UK revenue.
The retailer reported pretax profit in the six months to September 24 fell 17% to £201 million from £241 million a year ago. Revenue grew 1.8% to £2.31 billion from £2.27 billion.
Revenue from UK B&M fell by 0.9% to £1.89 billion from £1.91 billion, while revenue in France rose 18% to £184 million from £155 million. Heron Foods revenue increased 15% to £233 million from £203 million.
'There are signs of margin pressure on the business. An uncharitable takeaway is that B&M doesn't have a great degree of pricing power, a prized quality right now. When your whole model is about offering products at bargain prices, you probably have to absorb some of the extra cost so the brand‘??s reputation for value isn't undermined,' said AJ Bell's Russ Mould.
However, the budget retailer said trading has been good in the early stage of the 'golden quarter', which contains the key Christmas trading period.
Elsewhere in the FTSE 100, the mood was jubilant.
Property stocks were among the highest gainers, with Unite Group up 6.2%, British Land rising 6.4%, Land Securities rising 5.9%, and St James's Place adding 7.5%. Housebuilders also rose, with Persimmon, Barratt Developments and Taylor Wimpey rising 6.5%, 5.9% and 6.4% respectively.
Less steep interest rate hikes would be helpful for the housing sector, which has seen signs of a slowdown in recent months.
ConvaTec was the best FTSE 100 performer, adding 9.0%.
The medical products and technologies company said revenue in the 10 months to October 31 rose 2.4% year-on-year, slowing from a 3.6% hike in the first-half due to adverse effects from foreign exchange movements.
Nonetheless, ConvaTec upped its 2022 organic revenue growth guidance to a 5.4% to 5.8% range, from previous a 4.0% to 5.5% forecast.
In the midcaps, IntegraFin added 11%. The London-based investment platform said it expects to report adjusted pretax profit 'moderately above' the top end of analyst consensus estimates.
This follows cost reductions resulting from accounting updates, the firm explained.
Grafton jumped 11% as it backed yearly guidance and unveiled a new share buyback of up to £100 million.
'The favourable first half revenue trends in the Distribution businesses in Ireland and the Netherlands continued against the backdrop of solid underlying demand and building materials price inflation,' the building materials firm and DIY retailer said.
Average daily like-for-like revenue grew 1.8% annually at constant currency during the period from July 1 and October 31. It was up 17% from three years earlier, before the onset of the pandemic.
On AIM, Biome Technologies surged 62%.
The plastic material & resin manufacturing company said revenue in the third quarter of 2022 is in-line with expectations at £1.9 million, and 73% higher than the £1.1 million achieved the previous year.
It explained that the rise reflected demand across its customer portfolio, as well as some catch-up from the second quarter as raw materials for production finally cleared supply chain hurdles.
Biome confirmed that its outlook for 2023 remains unchanged.
In Friday's UK corporate calendar, there's half year results from insurer Beazley and warehouse investor Urban Logistics REIT. There will also be trading statements from financial services firm Permanent TSB and toys, crafts and stationery retailer TheWorks.co.uk.
The economic calendar for Friday has UK monthly GDP estimates, a production index reading, and trade statistics, as well as German consumer inflation figures, at 0700 GMT.
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