FTSE rallies on expectations of a US rate rise - London Report

RISES in Dixons Carphone and Pearson pulled the markets up for a second session in a row, ahead of a 25 basis point rise in US interest rates.

The blue-chip FTSE 100 index was up 43.40 points, or 0.7 per cent at 6,061.19 points by the close, outperforming the broader European market.

The gains were broad-based, with Dixons Carphone, Britain’s largest electricals and mobile phone retailer, among the top risers, up 1.8 per cent after reporting a forecast-beating 23 per cent rise in first-half profit.

The company, which trades as Currys, PC World and Carphone Warehouse in the UK and Ireland, had a strong performance in its home market which helped it outperform rivals.

“Dixons Carphone is emerging as a clear beneficiary as the Internet of Things becomes the new order, and the shares have comfortably outperformed the market of late,” Keith Bowman, equity analyst at Hargreaves Lansdown, wrote in a note.

Education publishing company Pearson gained 5.2 per cent after BNP Paribas upgraded it to “outperform” from “neutral”, citing hopes new management would refocus the asset mix and allocate capital towards acquisitions and buybacks.

Investors were also cheered by engineering company Rolls-Royce’s plans to cut a layer of senior management in order to turn the business around, sending its shares up 4.9 per cent. The company has issued four profit warnings in just over a year.

The index was supported by weakness in the pound, as sterling hit an eight-day low against the dollar after data showed UK earnings grew at the slowest pace since the start of the year.

The prospect of a small US interest rake hike that could bring some stability to markets helped support commodity-related stocks, with miners BHP Billiton, Antofagasta and Anglo American up between one per cent and three per cent.

Shares in BP and Royal Dutch Shell cut gains as Brent crude fell again. BP ended up 0.7 per cent, while Shell dipped by 0.1 per cent.

However, supermarkets found themselves towards the bottom of the index, following a rally on the back of industry data in the previous session. The largest grocer, Tesco, was down 0.8 per cent.