(Alliance News) - Stock prices in London rebounded early Tuesday as the market digested aggressive government action against Covid-19 in the UK and unprecedented stimulus measures from the US central bank, while in the FTSE 250, Dunelm Group fell after axing its dividend.
The FTSE 100 index was up 184.07 points, or 3.7%, at 5,177.96. The blue-chip index closed down 196.89 points, or 3.8%, at 4,993.89 on Monday.
The mid-cap FTSE 250 index was up 368.54 points, or 2.8%, at 13,446.55, and the AIM All-Share index was up 1.6% at 606.07.
The Cboe UK 100 index was 4.3% higher at 8,782.98. The Cboe 250 was up 2.1% at 11,649.83, and the Cboe Small Companies up 0.1% at 7,514.37.
In mainland Europe, the CAC 40 in Paris was up 3.8%, while the DAX 30 in Frankfurt was up 5.1%.
International markets surged after the Federal Reserve on Monday unveiled an unprecedented bond-buying programme to support the economy.
The Japanese Nikkei 225 index closed up 7.1% on Tuesday. In China, the Shanghai Composite closed up 2.3%, while the Hang Seng index in Hong Kong ended up 4.4%.
The Fed, which has already slashed interest rates to record lows, said it will buy unlimited amounts of Treasury debt and take steps to lend directly to small-and medium-sized firms hurt by a lockdown across the country.
Markets.com analyst Neil Wilson said: "The Federal Reserve went all-in yesterday, opening the taps on an unlimited asset purchase programme that will for the first time include corporate bonds as well as US government debt. There were other measures in a broad package of support for companies that goes about as far as it's possible to go.
"So over to Washington, and Congress is yet to agree on a roughly USD2 trillion rescue package. Treasury Secretary Steven Mnuchin and Senate Minority Leader Chuck Schumer claim they are 'very close' to a deal. House Speaker Nancy Pelosi, the bete noire of President Trump, unveiled a USD2.5 trillion plan in response. Democrats don't want to be seen to be blocking the rescue deal. For all the posturing a deal is coming - the perfect won't be the enemy of the good on this occasion."
In the FTSE 100, oil majors were in the green, tracking spot oil prices higher. BP was up 6.5%, and Royal Dutch Shell 'A' and 'B' shares were up 7.1% and 8.1% respectively.
Brent oil was quoted at USD27.70 a barrel Tuesday morning, up from USD25.30 late Monday.
"In the energy market, crude oil is green [as] investors are hopeful that the QE package introduced by the Fed will help the economy," said Avatrade analyst Naeem Aslam.
At the other end of the large cap index, ITV was the worst performer, down 1.7%, extending losses from Monday after the broadcaster withdrew its guidance for 2020 as well as its 2019 final dividend. The stock closed down 5.0% on Monday.
In the FTSE 250, Dunelm Group was down 5.1% after the home furnishings retailer scrapped its interim dividend and closed all its stores to customers in response to the UK government's declaration of a nationwide lockdown.
The retailer said that for the first ten weeks of the third quarter to March 7, total like-for-like sales were up 6.5%. Over the ten weeks, like-for-like store sales were up 2.4% and Dunelm.com sales were up 32%. Total sales growth, including the benefit of new store openings, was 7.9%.
However, Dunelm said that over the past two weeks, it has seen a "progressively negative impact" on trading as a result of the pandemic, with total LFL sales down 8.8% - driven by reduced footfall in physical stores.
Dunelm said it intends to temporarily close all of its customer facing operations from Tuesday, including Click & Collect.
The pound was quoted at USD1.1655 Tuesday morning, up from USD1.1471 at the London close Monday, ahead of crucial purchasing managers' index readings at 0930 GMT.
Analysts are estimating that the UK manufacturing PMI reading will register at 45.1 points in March, well down from February's 51.7 score, with the services index at 45.0 points, down from last month's 53.2.
UK Prime Minister Boris Johnson is facing calls for clarity after placing the UK on a police-enforced lockdown with drastic new measures in the fight against the coronavirus outbreak.
Johnson ordered people only to leave their homes under a list of "very limited purposes", banned public gatherings of more than two people and ordered the closure of non-essential shops.
However, police chiefs warned of phone lines being inundated with calls on Monday night with questions about what movements are still permitted, while members of Parliament also called for answers. In an address to the nation from Downing Street, Johnson ordered people to only leave their homes to shop for basic necessities "as infrequently as possible", and to only perform one form of exercise a day.
They can also seek medical help, provide care to a vulnerable person or travel to work if "absolutely necessary", under the measures to last until at least Easter Monday.
Frasers Group shares were up 0.4%. The Mike Ashley-led company had initially said Monday it would keep Sports Direct and Evans Cycles stores open in the face of the UK lockdown, claiming they provide an essential fitness benefit. However, Frasers reversed itself early Tuesday, saying all the stores will close.
The euro was quoted at USD1.0829, higher than USD1.0741 late Monday.
The German manufacturing PMI reading came in at 45.7 in March from 39.6 in February. The services PMI reading slumped to 34.5 in March, against February's reading of 52.5.
Against the yen, the dollar was trading at JPY110.40, down from JPY111.47.
Gold was priced at USD1,561.90 an ounce, up from USD1,543.08.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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