Stocks in London were boosted by hopes that the world’s largest two economies would change course on major policies which have been weighing on investors’ minds in recent months.
The US Federal Reserve’s policy setting Federal Open Market Committee started its two-day meeting on Tuesday, with investors hopeful that the central bank offer signs that it is ready to slow the pace of its interest rate hikes.
Meanwhile, unconfirmed reports from China suggested that the damaging zero-Covid policy might be nearing the end of its shelf-life.
The FTSE 100 index closed up 91.63 points, 1.3%, at 7,186.16. The FTSE 250 ended up 305.97 points, 1.7%, at 18,195.90, while the AIM All-Share added 8.41 points, 1.0%, at 814.54.
The Cboe UK 100 closed up 1.1% at 718.14, the Cboe UK 250 ended up 1.7% at 15,626.22, and the Cboe Small Companies ended down 0.1% at 12,320.76.
In European equities on Tuesday, the CAC 40 in Paris ended up 1.0%, while the DAX 40 in Frankfurt closed up 0.6%.
Stocks in New York were weaker, however. The Dow Jones Industrial Average was down 0.4%, the S&P 500 down 0.5% and the Nasdaq Composite 0.8% lower.
Sterling was quoted at $1.1465 late Tuesday, lower than $1.1500 at the London equities close on Monday. The euro traded at $0.9873, down from $0.9885 late Monday. Against the yen, the dollar was quoted at JP¥148.07, down from JP¥148.61, but off intraday lows.
The dollar got a late boost after the Institute for Supply Management’s manufacturing purchasing managers’ index topped expectations, coming in at 50.2 points and above an FXStreet cited forecast of 50.0 - the no-change mark.
While hopes for a Fed pivot lifted stocks in London, Tuesday’s ISM survey reminds investors about the strength of the US economy and the likelihood of another large rate hike.
The Federal Reserve is widely expected to announce a fourth successive 75 basis point rate hike on Wednesday, though stock market investors are hopeful that the path thereafter will be less steeply upwards.
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1800 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1830 GMT. Powell’s words will be scrutinised carefully for any indication of how the Fed will approach a pivot and when it may come.
According to the CME FedWatch tool, a 75 basis point hike is almost a foregone conclusion. The tracker suggests there is an 88% chance for another three-quarter point rate rise on Wednesday.
This would take the federal funds rate range to 3.75%-4.00%, roughly a 15-year-high. While analysts believe another hike is likely when the Fed meets in December, there is speculation that the US central bank will finally let up and slow the pace of its rate rises.
Stocks were also boosted by unconfirmed posts on Chinese social media, reported by AFP, saying officials were putting together a committee to discuss how to move the country away from its economically damaging zero-Covid policy.
The reports do little to suggest that the notorious zero-Covid policy will be coming to an immediate end. Investors will have to wait until at least next year before the policy will change. But, eventually the policy will have to end, and Tuesday’s reports suggest that conversations about ending the policy are more advanced than many previously thought.
Shares in the mining and luxury retail sectors ended higher, reflecting their exposure to the ebbs and flows of the Chinese economy.
Anglo American and Glencore rose 5.8% and 4.9%. Burberry closed up 1.7%, while Paris-listed peer LVMH added 1.9%.
Ocado was by far and away the best FTSE 100 performer, surging 39%.
It announced its burgeoning warehouse technology business will expand into South Korea.
Ocado Solutions will parter with Lotte Shopping, the largest retail affiliate of the South Korean conglomerate Lotte Group.
Lotte Group is one of the largest business conglomerates in South Korea, with interests spanning retail, food, hotels and chemicals, with a total annual revenue of ?75 trillion, about £45 billion.
Lotte Shopping is the group’s largest retail affiliate, operating department stores, hypermarkets, supermarkets and e-commerce platforms in South Korea, with an annual revenue of ?15.6 trillion, about £9.8 billion.
No financial details were provided, though Ocado said it expects the deal to create ‘significant long-term value’.
BP rose 1.4%. The oil major said it continued ‘performing while transforming’ in the third quarter of the year. It recorded $57.81 billion in revenue during the quarter, up 52% from $37.87 billion a year prior but 19% lower from $67.87 billion in the second quarter.
It swung to a pretax profit of $1.98 billion from a loss of $495 million a year before. Third quarter profit was however significantly lower than £14.06 billion in the second quarter.
The company said it plans to execute another $2.5 billion share buyback before the release of its fourth quarter results. Further, BP said it expects to be able to deliver share buybacks of $4.0 billion every year and increase annual dividends per share of around 4% through 2025, based on its forecast with a price of around $60 per barrel Brent.
Auction Technology closed up 9.5%. Barclays began coverage of the stock with an ‘overweight’ recommendation.
Elsewhere in London, Osirium Technologies soared 72%. The cloud-based cybersecurity company said bookings for the nine months to September 30 were up to £2.5 million, compared to £1.6 million a year before.
‘Average contract values have also continued to grow during the period, as a result of a greater preparedness and need on behalf of customers to spend on cybersecurity for the long-term,’ the company said.
Fellow AIM listing Westminster tumbled 22%, however.
The provider of security services for sensitive places such as ports, airports and commercial buildings said it expects revenue to be around a third lower than market expectations for 2022 and loss before tax to be around half that of 2021, when Westminster’s pretax loss was £1.9 million.
This is mostly due to ‘slippage’ from a ‘multi-million-pound’ technology project for the Middle East & North Africa region.
Gold was quoted at $1,644.63 an ounce late Tuesday, higher than $1,638.60 on Monday. Brent oil was trading at $94.48 a barrel, higher than $92.24.
Wednesday’s local corporate calendar has a third-quarter update from Aston Martin Lagonda, pharmaceutical firm GSK and retailer Next. Packaging firm Smurfit Kappa and insurer Hiscox report trading statements.
The economic calendar has manufacturing PMIs from the eurozone and Germany at 0900 GMT and 0855 GMT, before the Fed interest rate decision at 1800 GMT.
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