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(Alliance News) - The FTSE 100 was trading at a four-month high on Monday following news that a phase one trade deal between the US and China is "totally done".
The FTSE 100 index was a sharp 159.39 points higher, or 2.2%, at 7,512.83, trading at its best level since early August.
The FTSE 250 was up 195.03 points, or 0.9%, at 21,702.82, and the AIM All-Share was up 0.9% at 925.75.
The Cboe UK 100 was up 2.2% at 12,733.46, the Cboe UK 250 was up 1.1% at 19,640.75, and the Cboe Small Companies 0.5% higher at 11,738.33.
In European equities on Monday, the CAC 40 in Paris was up 0.9%, while the DAX 30 in Frankfurt 0.6% higher.
"UK markets are surging higher once again today, with positive sentiment over an impending US-China trade deal continuing to help drive stocks higher," said Joshua Mahony, senior market analyst at IG.
The so-called phase one agreement announced Friday includes elements dealing with intellectual property protections, technology, currency and financial services.
US Trade Representative Robert Lighthizer called the deal "remarkable" in scope, but said it won't solve all the problems between the world's two biggest economies.
"The way to think about this deal, is this is a first step in trying to integrate two very different systems to the benefit of both of us," he said in an interview with CBS.
He said the USD50 billion in additional purchases of American agricultural products by China is spelled out in writing in the agreement. Though the agreement is still being translated and has yet to be signed, Lighthizer insisted, "This is totally done."
He would not give a precise date for the signing but said he expected it to happen in early January.
US stocks are pointed to a higher start on Monday, with the Dow Jones called up 0.1%, the S&P 500 up 0.3% and the Nasdaq also seen up 0.3%.
Meanwhile, the pound was firm, quoted at USD1.3365 at midday Monday, compared to USD1.3346 at the close on Friday, despite some disappointing data.
The IHS Markit/Chartered Institute of Procurement & Supply flash UK composite output index fell to 48.5 in December from 49.3 in November. This marked nearly a three-and-a-half year low for the index.
By sector, the services business activity index fell to a nine-month low of 49.0 in December, versus November's 49.3. Consensus, according to FXStreet, was for a reading of 49.5.
Meanwhile, the manufacturing purchasing managers' index fell to a four-month low of 47.4 in December, from a reading of 48.9 in November. Consensus had been looking for a reading of 49.3.
"December's PMI survey data sadly lacked festive cheer, indicating that the economy contracted for the third time in the past four months. The latest decline was the second-largest recorded over the past decade, and increases the likelihood that the economy contracted slightly in the fourth quarter," said Chris Williamson, chief business economist at IHS Markit.
However, David Cheetham at XTB thinks upwards revisions to the figures could be in store.
"It would not be at all surprising to see significant upwards revisions to these flash estimates later this month, with the markets and business in general reacting positively on the whole to the Conservative victory last week and the final readings should reflect this improvement in sentiment," he said.
IHS Markit data from the eurozone also painted a less than rosy picture, with the bloc posting its worst quarter since 2013 in the final three months of 2019
The flash eurozone composite purchasing managers' index came in at 50.6 for December, unchanged on the month before. The manufacturing PMI was 45.9 from 46.9 in November, meaning the eurozone's manufacturing contraction has deepened. IHS Markit reported a services PMI of 52.4, improved from 51.9 in November.
By country, France was most supportive, but Germany remains in a "mild" downturn due to a deepening manufacturing recession.
The euro stood at USD1.1141 at midday Monday, up against USD1.1123 at the same time on Friday.
Elsewhere in forex, the yen was soft. Against the yen, the dollar was trading at JPY109.41 compared to JPY109.35 late Friday.
In London, British American Tobacco was leading the FTSE 100 gainers after Bank of America raised the cigarette maker to Buy from Underperform. The stock was up 4.3%.
London-listed miners were higher on the US-China trade deal, with Glencore, up 4.1%, BHP Group up 3.0% and Rio Tinto 3.0% higher.
"Oil, along with the broader commodities complex, benefited from the initial optimism around a phase-one trade deal between China and the US. What the market needs now though is clarity around exactly what the deal entails," said ING.
Brent oil was quoted at USD65.30 a barrel midday Monday from USD64.58 late Friday.
Shares in oil major BP were up 1.2%, while Royal Dutch Shell 'A' shares were 1.1% higher and 'B' shares up 1.5%.
Meanwhile, gold was quoted at USD1,477.33 an ounce against USD1,471.61 at the close on Friday, the safe haven asset higher despite Monday's risk-on mood.
The standout performer in the FTSE 250 was Sports Direct International - which has just received shareholder approval to change its name to Frasers Group - after a robust set of interim results.
Shares in the sporting goods retailer and House of Fraser department store owner were up 23% at midday, placing the stock at the top of the mid-cap index.
Pretax profit in the 26 weeks to October 27 grew 21% to GBP90.2 million from GBP74.4 million reported a year earlier, as revenue rose by 14% to GBP2.04 billion from GBP1.79 billion.
Sports Direct said its revenue growth was largely boosted by acquisitions, growth in Premium Lifestyle and Wholesale & Licensing divisions and the full period of revenue contribution from House of Fraser versus 11 weeks last year.
Looking ahead, company expects its total underlying earnings before interest, taxes, depreciation, and amortization - including House of Fraser but pre IFRS 16 adjustments - to grow between 5% and 15% from the prior year's pre-House of Fraser underlying Ebitda of GBP339.4 million.
Cineworld was down 1.5% as it looked to expand further into North America.
The cinema operator said it has agreed to buy Cineplex, the largest cinema operator in Canada, for CAD2.8 billion, or about USD2.1 billion. This deal comes almost exactly two years after Cineworld agreed to buy US-based cinema operator Regal Entertainment Group in a USD3.60 billion reverse takeover.
Cineworld currently has a market capitalisation of GBP2.79 billion, or USD3.73 billion.
By Lucy Heming; lucyheming@alliancenews.com
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