The FTSE 100 logged its best session in three weeks today while Wall Street hit record highs as markets continue to ride a wave of vaccine optimism.
The blue-chip bourse closed up 1.9 per cent, while the FTSE 250 midcap index rose by 2.6 per cent.
It comes after the FTSE recording its biggest gain since 1989 in November.
Stocks were helped higher by positive data from China, which showed that its factory output had grown at the fastest rate for a decade last month.
And manufacturing data from the UK showed that factory output increased for the sixth consecutive month in November.
Airlines, banks, and oil firms all made the ranks of the risers. British Airways owner IAG was one of the top performers in early trading, rising 5.5 per cent, while Rolls-Royce jumped six per cent.
Positive vaccine sentiment after last month’s announcements continues to buoy airlines on the hopes that air travel may return sooner than expected.
Lloyds, Barclays, HSBC, and Natwest all made strong gains today.
The rapid start saw the FTSE outperform its fellow European markets, with Germany’s DAX up 0.7 per cent and the CAC up just over one per cent.
Conor Campbell of Spreadex said that the challenge for the FTSE would be whether it could push higher from these levels.
A lot will depend on the outcome of this week’s crunch Brexit negotiations, with just one month to go before the end of the transition period on 1 January.
A trade deal could see the FTSE continue November’s rapid rally on renewed hopes for the UK’s economic prospects next year.
Wall Street chases fresh highs
US stocks also continued a recent run of strong form today, with vaccine optimism helping to drive shares to fresh highs.
The S&P 500 and Nasdaq both rose more than one per cent to hit record highs, while the Dow Jones gained 0.9 per cent.
Pfizer and Moderna both made gains after markets opened as investors remained optimistic about the rollout of Covid-19 vaccines.
Both pharmaceutical firms are seeking regulatory approval for their respective treatments.
“It’s another step closer to pre-pandemic normality, and though there are still, minimum, months of lockdown measures left, and a war’s worth of economic damage to undo over the next few years, the markets are firmly focused on the long-term,” said Spreadex’s Campbell.
The positive data from China earlier in the day also helped to offset concerns about a slowdown in manufacturing activity in the US.
Markets also turned their attention back to the long-running question of a US stimulus package, with signs that further talks could be on the way.
“Bullish sentiment is doing the rounds in the US on the back of optimism for coronavirus drugs and hopes of a stimulus package,” said David Madden of CMC Markets.
“A bipartisan $900bn relief package bill has been put forward but is it unlikely to get much support as too many discrepancies exist. The fact that some numbers are being bandied about is a good sign.”
Retail stocks bump as survivors circle
This morning it was announced that both Sir Philip Green’s Arcadia Group and Debenhams had collapsed, putting 25,000 jobs at risk.
Shares in Mike Ashley’s Frasers Group – which offered Arcadia a £50m loan – and Marks and Spencer rose in early trading on the expectation that they could be the only department stores left standing.
JD Sports, which had been in talks to buy Debenhams before pulling out this morning, also saw shares jump three per cent.
Susannah Streeter of Hargreaves Lansdown said that the assets of the collapsed firms – which include brands such as Topshop – could prove attractive to the survivors.
“A nightmare before Christmas is unfolding for 25 thousand employees who will lose their jobs if buyers are not found for parts of both businesses.
“Arcadia Group’s collapse has set off a domino effect, with JD Sports pulling out of talks to buy Debenhams. Arcadia is the biggest concession operator in Debenhams and so its collapse into administration clearly put the frighteners on management.”
Manufacturing output grows again
Data this morning from IHS Markit showed that manufacturing output increased again in November, the sixth consecutive month of growth.
Manufacturing PMIs came in at 55.6, ahead of forecasts of a rise of 55.2 for the month.
Any score above 50 represents growth, any score below contraction.
Fiona Cincotta of Gain Capital said: “It’s understandable that manufacturing will be stronger than services during the lockdown period given that they haven’t been required to close.”
The bump in manufacturing came on the back of similar figures from the world’s second biggest economy.
Asian markets traded higher this morning, after data from China showed that its factories had grown at the quickest pace in a decade in November.
Overnight, the Nikkei was up 1.3 per cent, while the SSE Composite rose 1.8 per cent.