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(Alliance News) -Â With the US debt crisis potentially parked for a couple of months and energy prices pulling back from recent highs, equities in London shifted into rally mode on Thursday.
However, the week's real test comes on Friday, with the release of the US jobs report for September.
The FTSE 100 index was up 71.46 points, or 1.0%, at 7,067.33 on Thursday at midday. The mid-cap FTSE 250 index was up 63.38 points, or 0.3%, at 22,450.00. The AIM All-Share index was up just 0.73 of a point, or 0.1%, at 1,200.86.
The Cboe UK 100 index was up 1.1% at 702.16. The Cboe 250 was up 0.1% at 20,285.10, and the Cboe Small Companies down 0.2% at 15,404.34.
In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were up 1.3% and 1.1% respectively on Thursday.
Markets were boosted by progress on a US debt ceiling extension and by a cooling off of energy prices.
US senators neared agreement in the small hours of Thursday to stave off a catastrophic credit default after Democrats said they were close to accepting an offer from the Republicans to raise the debt limit for two months.
Mitch McConnell, who leads the Republican opposition in the upper chamber of Congress, floated the truce as his party was set to vote against Democratic plans to hike the nation's borrowing cap until December 2022 – prompting hours of negotiations late into Wednesday night.
"We're making good progress. We're not there yet, but [we] hope we can come to agreement tomorrow morning," Chuck Schumer, the Senate's Democratic leader, said after around 10 hours of talks.
Pierre Veyret, technical analyst at ActivTrades, said: "Investors welcomed positive talks in the US about the debt ceiling while European traders were also pleased to see Russia offering its energy support to the Old Continent to mitigate the risk of a supply crunch."
Oil prices also eased off recent highs, helping to soothe fears over runaway inflation. Brent oil was trading at USD80.36 a barrel midday Thursday, down from USD81.12 late Wednesday after recently pushing above USD83 to fresh three-year highs.
Wall Street was set for a higher start as traders cheer resolution - at least for now - of the debt ceiling saga. The Dow Jones was pointed up 0.5%, the S&P 500 up 0.7% and the Nasdaq Composite up 0.9%.
In focus this afternoon are the latest US jobless claims at 1330 BST, coming ahead of Friday's nonfarm payrolls figure.
"As the clouds in the US begin to clear a little, so the gainers in London reflect this more optimistic view of global growth. Risers on the FTSE 100 span a variety of sectors, but miners are leading the way," said Chris Beauchamp, chief market analyst at IG.
Antofagasta was London's top blue-chip performer at midday, up 5.5%, while Anglo American was in close second with a 4.9% share price rise and Rio Tinto advanced 3.0%.
Also in the green was Tesco, up 2.1% as it extended Wednesday's 6.0% gain on its announcement of an interim profit jump and a GBP500 million share buyback.
At the bottom of the FTSE 100 index were ex-dividend stocks, with housebuilder Taylor Wimpey down 1.6% and DIY retailer Kingfisher down 0.8%.
In the FTSE 250, JTC rose 5.0% as it raised GBP78.9 million to buy US-based fund and structuring administration services provider SALI in a deal worth up to USD236.0 million.
JTC will pay an initial fee of USD204.5 million and up to USD31.5 million on performance targets. The initial USD204.5 million will be made up of USD192.2 million in cash and up to a maximum of USD12.3 million in shares.
British Gas-parent Centrica advanced 2.9% after an upgrade to Overweight from Equal Weight at Morgan Stanley. "A surge in supplier failures is accelerating market share gains which, combined with further market reforms, should deliver sustainable upside risk to margins for the first time since around 2014," said Morgan Stanley.
There was gains for automotive retailers, as a global semiconductor shortage hinders new vehicle production, limiting supply and bolstering margins for car sellers.
Motorpoint shares jumped 7.7% after the vehicle retailer said revenue for six months to September 30 was up 57% year-on-year following strong demand for used vehicles. Margins remained wide, with gross profit rising 58% on a year ago.
Peer Pendragon rallied 7.4% as similarly robust margins led to a guidance upgrade. It now expects underlying pretax profit for 2021 to be around GBP70.0 million, up from a prior guidance range of GBP55.0 million to GBP60.0 million previously.
While supply issues have resulted in a reduction in the number of new vehicle deliveries achieved, profit margins have remained strong and helped to mitigate the volume shortfall. Pendragon also noted "unprecedented tailwinds" in used car margins.
While a boon for the two London-listed vehicle retailers, German carmaker BMW on Thursday said it expects the supply of semiconductors to "remain difficult" for it. The company reported a 12% drop in third quarter vehicle sales.
"Although the BMW group has so far been able to absorb the impact of these bottlenecks, the possibility of sales being affected in the coming months cannot be ruled out," it said.
BMW shares were 3.0% higher in Frankfurt, though they are down 12% over the past four months.
The chip shortage hindering car makers was reflected in German industrial data for August.
Industrial output in Germany was down 4.0% month-on-month. Analysts had expected a much more modest 0.4% decline, according to FXStreet, after a 1.3% rise in July.
The manufacture of motor vehicles, trailers and semi-trailers dropped by 18% month-on-month - amid well-reported semiconductor shortages denting the automotive industry - while the manufacture of machinery and equipment was down 6.3%.
"With conditions having worsened since then, Germany's manufacturing problems threaten to keep overall economic activity well below its pre-pandemic level until next year," commented Capital Economics.
The euro traded at USD1.1561 at midday London time, higher than USD1.1538 late Wednesday.
Sterling was quoted at USD1.3589 on Thursday, up on USD1.3570 at the London equities close on Wednesday. Against the yen, the dollar was quoted at JPY111.44, up from JPY111.34.
Gold was quoted at USD1,761.61 an ounce, firm on USD1,760.00 on Wednesday.
By Lucy Heming;Â lucyheming@alliancenews.com
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