FTSE 100 rises as investors weigh coronavirus stimulus measures
The FTSE 100 rose for a third consecutive day this morning, as traders in London weighed up the economic impact of coronavirus and digested news of yesterday’s emergency rate cut by the US Federal Reserve.
The blue-chip index got off to a jittery start, opening slightly higher before dropping into the red, but then recovered and rose as much as 1.18 per cent.
Read more: Asian stocks mixed after Fed rate cut fails to lift Wall Street
The FTSE 100 was lifted by miners and other export-heavy companies, which were boosted by a dip in sterling as investors considered the impact of stimulus measures on the slowing global economy.
The more domestically-focused FTSE 250 rose 0.47 per cent.
Wall Street tumbled yesterday after the Fed’s shock announcement it was cutting interest rates by 50 basis points, the first emergency cut since the 2008 financial crisis, shocked rather than soothed investors.
Markets are weighing whether the European Central Bank (ECB) and other governments are likely to introduce stimulus measures in a bid to mitigate the economic impact of the Covid-19 outbreak.
Traders now see it as overwhelmingly likely that the ECB will cut interests next week, and are waiting to see if the Bank of England will follow suit.
Meanwhile, a rally in UK government bonds has sent the yield on Britain’s benchmark 10-year gilt to a record low, as investors prepare for an anticipated rate cut.
Yesterday, the World Bank pledged $12bn in emergency aid for developing countries grappling with the outbreak, while the G7 nations said they were “ready to act”.
Overnight, the Nikkei 225 and Shanghai composite ended in the green, while Hong Kong fell following the Fed’s decision to slash rates.
The FTSE 100’s European counterparts also had a mixed open, but Germany’s Dax and France’s CAC 40 recovered to rise 0.70 per cent and 0.41 per cent respectively.
Miners Rio Tinto, BHP and Antofagasta helped lead Britain’s blue-chip index higher, while airline owners IAG and Easyjet were among the highest fallers.
Shares in shopping centre-owner Intu plunged over 40 per cent in early trading after it cancelled an emergency fundraise after failing to convince shareholders to put in enough money. The stock later trimmed some of its losses to stand 24.4 per cent lower by mid-morning.
Intu said last month that it was seeking to raise between £1bn and £1.5bn from investors to fix its balance sheet, but announced this morning that it is “unable to proceed with an equity raise at this point”.
Sirius Minerals soared over 17 per cent after shareholders backed a cut-price rescue deal by mining major Anglo American.
Read more: Federal Reserve slashes interest rates over coronavirus fears
“After a tricky session on Tuesday, one that saw the Federal Reserve provoke the opposite intended effect with its impromptu rate cut, Wednesday got off to a comparatively calm start,” said Spreadex’s Connor Campbell.
“Whether the markets can remain green throughout the session is another question entirely, especially since they’ve got to run a services PMI gauntlet,” he added.