Stocks in London were shining green at the close on Wednesday, with investors taking encouragement from the Chinese government's move to support beaten-down markets that have slashed the valuations of some of the country's biggest firms.
Traders were also showing no signs of nerves ahead of the US Federal Reserve's rate decision, which is due this evening.
The FTSE 100 closed up 115.98 points, or 1.6%, at 7,291.68 on Wednesday. The mid-cap FTSE 250 index ended up 647.88 points, or 3.4%, at 20,905.54. The AIM All-Share index rose 27.61 points, or 2.8%, at 1,015.31.
The Cboe UK 100 index closed up 1.8% at 725.91. The Cboe 250 ended up 3.4% at 18,462.39, and the Cboe Small Companies rose 0.7% at 14,510.00.
In mainland Europe, the CAC 40 in Paris jumped 3.7% and the DAX 40 in Frankfurt surged 3.8%.
Chinese authorities pledged to maintain capital market stability and adopt measures to handle risks for troubled property developers.
The official Xinhua news agency said the policy would respond to the need to boost the economy in the first quarter and new loans will grow appropriately, it said, citing a meeting chaired by Vice Premier Liu He.
In London, Scottish Mortgage Investment Trust closed up 7.8%. The trust holds investments in Chinese technology firms including WeChat owner Tencent and e-commerce titan Alibaba, with the pair surging 23% and 27% respectively in Hong Kong on Wednesday.
The wider Hang Seng index in Hong Kong gained 9.1%, while the Shanghai Composite closed up 3.5%.
Central banks will remain in focus this week with an anticipated interest rate rise from both the US Federal Reserve later on Wednesday and the Bank of England as well on Thursday.
The dollar was mixed ahead of the Fed's announcement, once again advancing on the Japenese yen but surrendering ground to the euro and pound as risk sentiment improved. Sterling rose to $1.3098 late Wednesday, from $1.3049 at the London equities close on Tuesday.
After slashing interest rates to a record low of 0.10% in March 2020 as the Covid-19 pandemic began to engulf Europe, the BoE is now on track for its third successive hike, which could take the key Bank Rate to 0.75%.
The euro traded at $1.1005 late Wednesday, up versus $1.0957 late Tuesday. Against the yen, the dollar rose to JP¥118.50 versus JP¥118.26.
The Fed unveils its latest monetary policy decision at 1800 GMT, followed by a press conference with Fed Chair Jerome Powell at 1830 GMT. The US central bank is expected to kick off its tightening cycle with an interest rate hike of a quarter percentage point.
A chunkier rate hike by the Fed could ‘knock the markets for six’, AJ Bell analyst Russ Mould commented.
Mould added: ‘The central bank has a fine balancing act of taking action to curb inflation while not being too aggressive and tripping up the economy. It is coming from a low base which means consumers and businesses should be able to easily stomach a small increase - the key question is how many more rate rises we'll get and how quickly they will come. Fast and furious could stall the US's growth engine.’
Ahead of the Fed, US stocks were higher, with equities in New York look set to post a second successive daily gain.
The Dow Jones Industrial Average was 1.1% higher in early afternoon trade, the S&P 500 was up 1.6% and the Nasdaq Composite jumped 2.7%.
NortonLifeLock shares were 12% lower in New York, while Avast fell 2.4% in London, but was seen down a more hefty 13% in afternoon trade.
The UK competition regulator took aim at Avast's takeover by US cybersecurity peer NortonLifeLock.
The Competition & Markets Authority noted that Avast and NortonLifeLock are ‘close competitors, with few other significant rivals’. The regulator said NortonLifeLock and Avast now have five working days to submit proposals to address its concerns, or it will refer the merger to an in-depth phase 2 investigation.
The US company said it does not intend to offer any phase 1 remedies but promised to ‘engage constructively’ with the CMA. However, due to the impasse, the two companies said they now expect the acquisition to complete in ‘mid-to-late 2022’.
Elsewhere in London, Restaurant Group rose 6.9%.
The Wagamama and Frankie & Benny's chain owner reported a significantly narrowed pretax loss of £38.4 million in the 53 weeks ended January 2. In its previous financial year, that ended December 27, 2020, the London-based restaurant operator posted a loss of £132.9 million.
Revenue rose 38% to £636.6 million last year from 459.8 million in 2020.
The company said that following the removal of Covid-19 restrictions in May last year, it delivered ‘strong’ like-for-like sales growth across its Wagamama, Pubs and Leisure businesses.
Gym Group fell 8.6%, meanwhile.
The low-cost gym chain operator said revenue in 2021 climbed 32% to £106.0 million and its pretax loss slimmed to £44.2 million from £47.2 million.
However, it warned of higher costs due to inflationary pressures.
‘In the current inflationary environment, we are seeing inflation in our operating cost base which is expected to be 4-6% overall. Whilst these increases will not be fully offset through price rises and operational efficiency in 2022, we expect that by 2023 they will be offset as the full benefit of the price rises starts to come through,’ Gym Group cautioned.
Brent oil was trading at $99.33 a barrel at the London equities close, down from $101.36 late Tuesday. Gold was quoted at $1,908.85 an ounce, lower than $1,926.06.
Thursday's economic calendar has the Bank of England interest rate decision at 1200 GMT. Inflation data from the EU is reported at 1000 GMT, before the latest US initial jobless claims at 1230 GMT.
The local corporate calendar has annual results from picture house operator Cineworld and takeaway delivery firm Deliveroo. Grocer Ocado reports first quarter numbers.
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