The FTSE 100 closed higher and Wall Street rose as renewed hopes of a US fiscal stimulus package lifted sentiment despite jobless claims remaining stubbornly high.
Two days after calling off negotiations on a comprehensive fiscal aid bill, US President Donald Trump today said that talks with Congress have restarted.
Trump has indicated that discussions are focusing on support for the US airline industry and stimulus cheques for Americans.
In London, the FTSE 100 got off to a lacklustre start before rising steadily. The blue-chip index closed 0.5 per cent higher at 5,978 points.
Renewed hopes that a partial stimulus deal could be reached powered US equities higher for the second day.
The benchmark S&P 500 was up 0.6 per cent by 6pm UK time. The Dow Jones climbed 0.3 per cent, while the Nasdaq advanced 0.5 per cent.
US equities rose despite new Department of Labor data showing that some 840,000 Americans filed new jobless claims in the week ending 3 October – a drop of just 9,000 from the previous week.
Fears over fresh restrictions cap FTSE 100 gains
British mid-caps rose to their highest levels in two months. The FTSE 250 finished 0.8 per cent higher.
FTSE 100 and 250 shares were boosted by a positive global mood amid renewed stimulus hopes. But concerns over more coronavirus restrictions in the UK kept a lid on gains.
Talk Talk led the midcap risers. Its shares surged 17.1 per cent after the telecoms firm disclosed it had received a buyout offer from asset manager Toscafund.
“Having been building in stake in Talk Talk in recent years Toscafund may have not unreasonably decided it could do a better job of managing the assets itself out of the glare of public markets,” said AJ Bell investment director Russ Mould.
The domestically-focused index was also boosted by Bank of England governor Andrew Bailey saying he believed that the UK and European Union should reach a trade deal.
Global markets lifted by stimulus bets
European equities also gained along with the FTSE 100 on hopes of forthcoming US stimulus measures increased risk appetite.
In Germany, the Dax rose 0.9 per cent, while France’s CAC 40 added 0.6 per cent.
Ben Laidler of Tower Hudson Research said markets were reacting in part to the prospect of a Joe Biden victory in the 3 November US presidential election. Various polls have shown him around 10 points ahead of Trump.
“Markets rallied as investors getting increasingly comfortable with a Democrat election victory,” he said.
Laidler said markets thought there was a high chance of “significant post-election fiscal stimulus”.