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(Alliance News) - London stocks finished firmly in the green on Tuesday as interest rate cuts from Australia and the US lifted hopes that other central banks will follow suit in a bid to counter the coronavirus disruption.
The FTSE 100 index closed up 63.31 points, or up 1.0%, at 6,718.20. The FTSE 250 ended up 402.26 points, or 2.1%, at 19,703.96, and the AIM All-Share closed up 21.69 points, or 2.5%, at 883.13.
The Cboe UK 100 ended up 0.7% at 11,351.81, the Cboe UK 250 closed up 1.9% at 17,647.42, and the Cboe Small Companies ended up 1.4% at 11,547.95.
In European equities on Tuesday, the CAC 40 in Paris ended up 1.0%, while the DAX 30 in Frankfurt ended 0.9% higher.
"The G7 meeting had delivered little, but the Fed has stepped into the breach once more, cutting rates by 50 basis points to help offset the potential impact of the coronavirus on the US. Of course, where the Fed goes, others will follow, and markets are likely to take this in a positive frame of mind," said Chris Beauchamp, chief market analyst at IG.
The highly-anticipated G7 phone call yielded underwhelming results, with no mention of any specific relief measures.
"G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase," the group said after a conference call of finance ministers and central bankers.
"G7 finance ministers and central bank governors stand ready to cooperate further on timely and effective measures," it said.
Overshadowing this meeting was a surprise interest rate cut from the US central bank just hours after.
The US Federal Reserve slashed interest rates by 50 basis points days after the central bank's chair said it stood ready to take action in the wake of disruption stemming from the coronavirus outbreak.
The Fed cut the federal funds rate to 1.00% to 1.25%, having stood at 1.50% to 1.75% previously.
"The fundamentals of the US economy remain strong. However, the coronavirus poses evolving risks to economic activity," the Fed said in a unscheduled statement on Tuesday.
The bank added: "The committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy."
On Friday, Fed Chair Jerome Powell said the bank "will use our tools and act as appropriate to support the economy".
He said on Tuesday that the emergency interest rate cut will provide a "meaningful boost to the economy" in the face of the coronavirus epidemic. However, Powell said it is unclear how long the outbreak will last, acknowledging "a rate cut will not reduce the rate of infection, it won't fix a broken supply chain".
Analysts had scheduled a 50 basis point rate cut from the Fed at its meeting later this month, to be held March 17-18.
The Fed's move followed the Australian Reserve Bank, which cut rates overnight, and comes ahead of the Bank of Canada's expected rate cut on Wednesday.
"FX markets are also finally seeing some volatility off the back of the Fed move, with the Aussie dollar surging despite the RBA's move to lower rates this morning, and the US dollar retreating across most currency pairs. The move has been felt in commodity prices too," said IG's Beauchamp.
The pound was quoted at USD1.2809 at the London equities close Tuesday, compared to USD1.2773 at the close on Monday.
The euro stood at USD1.1173 at the European equities close Tuesday against USD1.1157 at the same time on Monday. Against the yen, the dollar was trading at JPY107.33, down compared to JPY108.02 late Monday.
Brent oil was quoted at USD52.37 a barrel at the London equities close Tuesday from USD51.70 late Monday. Gold was quoted at USD1,636.30 an ounce at the London equities close Tuesday against USD1,594.61 at the close on Monday.
Stocks in the US, though, were firmly in the red following the surprise Fed cut.
The Dow Jones was down 1.2%, the S&P 500 index down 1.1% and the Nasdaq Composite down 1.0%.
In London, travel stocks rebounded, having suffered in recent weeks from worries over demand from holidaymakers amid the coronavirus outbreak.
British Airways parent International Consolidated Airlines closed up 7.2%, Anglo-German travel operator TUI up 3.2% and easyJet up 4.5%.
Housebuilders were also higher after an upbeat UK construction PMI.
The purchasing managers' index reached 52.6 in February, up from 48.4 in January, to hit the highest reading in over a year. It was the first time the index had registered above the no-change mark of 50.0 since April 2019.
"There were widespread reports that pent-up demand released since the general election had helped to boost workloads, especially in relation to house building and commercial construction projects," said Tim Moore, economics director at IHS Markit.
Persimmon closed up 3.6%, Taylor Wimpey up 2.4% and Berkeley Group up 1.6%.
In the FTSE 250, 4imprint surged 15% as it posted profit growth for 2019 and said it is on track to meet its USD1 billion revenue target ahead of schedule.
The marketing firm reported a USD54.0 million pretax profit for its financial year ended December 28, up 22% from USD44.3 million the previous year. This primarily resulted from 4imprint's 17% revenue rise to USD860.8 million from USD738.4 million, with all revenue growth organic.
4imprint aims to achieve USD1 billion of revenue by 2022 and said its 2019 trading momentum has put it in a "good position" to achieve this goal earlier than expected.
Rotork closed up 9.6% after reporting a higher annual profit as a result of lower costs and expenses amid a restructuring programme.
While revenue fell 3.8% in 2019 to GBP669.3 million from GBP695.7 million the year before, the electric, pneumatic and hydraulic valves manufacturer posted a 2.8% higher pretax profit of GBP124.1 million versus GBP120.7 million.
Ibstock was the worst performing mid-cap, finishing down 10% as it warned on slower start to 2020 amid political and economic uncertainty and reduced new build housing activity in the second half of 2019.
The Leicestershire-headquartered clay bricks manufacturer said pretax profit decreased by 12% to GBP82 million in 2019 compared to GBP93 million a year earlier, due to the non-repeat of a GBP11.2 million gain on disposal of property, plant and equipment secured in 2018.
In the UK corporate calendar for Wednesday, there are full-year results from financial services firm Legal & General, precious metals miner Polymetal International and specialty chemicals firm Elementis.
In the economic calendar on Wednesday, there are services PMI due from Japan, Ireland, China, Germany, the EU, the UK and the US at 0030 GMT, 0101 GMT, 0145 GMT, 0855 GMT, 0900 GMT, 0930 GMT and 1445 GMT respectively.
Outside of the PMI releases, there are German retail sales at 0700 GMT as well as eurozone retail sales at 1000 GMT. There is ADP employment change at 1315 GMT and the ISM's non-manufacturing report at 1500 GMT.
There is also the FTSE index review due after the London market close on Wednesday, which could see NMC Health, TUI and Kingfisher kicked out the FTSE 100 and replaced with Intermediate Capital Group, Pennon Group and Fresnillo.
By Lucy Heming; lucyheming@alliancenews.com
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