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(Alliance News) - Stocks in London ended higher on Wednesday as the European Central Bank pledged to ease the stress in volatile eurozone bond markets, while investors also braced for a major US rate hike.
The US Federal Reserve is set to announce a sharp increase in borrowing costs on Wednesday amid the troubling acceleration of inflation, and forecasters now expect officials to opt for the biggest rate hike in nearly three decades.
Until recently, the central bank seemed set to again increase the benchmark interest rate by 0.5 percentage points, but a resurgence of consumer and producer prices in May has sparked growing speculation of a 75-basis-point hike.
The FTSE 100 index closed up 85.95 points, or 1.2%, at 7,273.41. The FTSE 250 ended up 270.95 points, or 1.4%, at 19,315.98, and the AIM All-Share closed up 2.73 points, or 0.3%, at 917.77.
The Cboe UK 100 ended up 1.2% at 725.76. The Cboe UK 250 closed up 1.5% at 17,022.55. The Cboe Small Companies finished down 0.5% at 14,106.60.
In European equities, the CAC 40 stock index in Paris and the DAX 40 in Frankfurt ended up 1.4%. The FTSE MIB in Milan gained 2.9%.
"European markets have enjoyed a welcome respite today, after six days of losses, driven largely by the news that the ECB was looking to speed up work on a crisis tool to deal with concerns about fragmentation in EU bond markets, and Italian bonds," said CMC Markets analyst Michael Hewson.
"The FTSEMib has been the standout gainer because of these reports, leading the rebound higher, however we've also seen some decent moves in the rest of Europe's markets, as we look towards this evening's Federal Reserve rate meeting where it is widely expected the Federal Reserve will raise rates by either 50 or 75bps," Hewson added.
Stocks in New York were higher at the London equities close. The DJIA was up 0.7%, the S&P 500 index up 1.0% and the Nasdaq Composite up 1.5%.
In the FTSE 100, Whitbread ended up 6.3% after the hospitality firm said trading has been ahead of expectations.
The Premier Inn owner also said it plans to invest around GBP20 million to GBP30 million in labour, refurbishments and IT in its current financial year given a "tight" jobs market and its focus on maintaining a market leading position.
"However, our high levels of occupancy and continued strong sales performance mean we remain confident in our continued margin recovery in the UK," it said.
For its first quarter ended June 2, total sales were up 22% on their pre-pandemic level and up 11% on a like-for-like basis from pre-pandemic, meaning financial year 2020. UK total sales were 18% above pre-pandemic times.
B&M European Value Retail closed up 4.3% after Barclays upgraded the variety retailer to 'overweight' from 'equal weight'.
London Stock Exchange Group closed up 5.9% after UBS raised the exchange operator to 'buy' from 'neutral'.
At the other end of the large-caps, oil majors ended among a handful of stocks in the red, tracking spot oil prices lower. BP and Shell both closed down 1.6%.
Brent oil was quoted at USD120.95 a barrel at the London equities close, down sharply from USD124.93 at the close Tuesday.
Meanwhile, BP is taking just shy of a 41% stake in an Australian energy project being billed as one of the world's largest renewable power stations.
BP said it would operate the USD36 billion "Asian Renewable Energy Hub", an array of solar and wind facilities sprawled over 6,500 square kilometres of Australia's sparsely populated west coast.
In the FTSE 250, Trustpilot ended the best performer, up 8.8%. Sky News reported late Tuesday that the online review platform launched a search for a new chair to replace Tim Weller little more than a year after listing on the London Stock Exchange.
WH Smith ended the second best performer, up 8.5%, after the books and stationary retailer said its third quarter revenue has topped pre-pandemic levels for the first time, helped by its strong travel unit.
For the 15 weeks to June 11, total revenue grew just above its pre-pandemic level for the first time, driven by the travel arm. Sales at the travel unit topped pre-virus levels, while in its high street arm, sales were 79% of pre-virus levels.
With its travel arm's strong performance expected to carry across all three divisions into the peak summer trading period, WH Smith said it now expects full-year results at the higher-end of analyst forecasts.
The pound was quoted at USD1.2050 at the London equities close, up from USD1.2011 at the close Tuesday.
European Central Bank held an emergency meeting to discuss tools for quelling rising borrowing costs for more indebted eurozone members as it embarks on a monetary tightening policy.
The euro stood at USD1.0395 at the European equities close, down from USD1.0414 late Tuesday.
With inflation soaring, the ECB drew a line under years of ultra-loose monetary policy last Thursday, ending its massive bond-buying stimulus at the end of the month and announcing a long-awaited interest rate hike for July.
The ECB said it would "apply flexibility" to the reinvestment of maturing bonds under its pandemic-era debt purchasing programme to target at-risk countries, widely considered to include Italy, Spain, Greece and Portugal.
It would also speed up work on "a new anti-fragmentation instrument", which could be used to tackle further bond market stress.
Against the yen, the dollar was trading at JPY134.60 in London, down from JPY134.88 late Tuesday.
Gold stood at USD1,821.35 an ounce at the London equities close, higher against USD1,814.44 late Tuesday.
The economic events calendar on Thursday has the Bank of England interest rate decision at midday and the latest US jobless claims numbers at 1330 BST.
The UK corporate calendar on Thursday has annual results from hazard detection and life protection company Halma and car parts and bicycle retailer Halfords Group. There are also trading statements from clothing retailers N Brown Group and boohoo.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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