LONDON MARKET CLOSE: FTSE at two-year high as UK to relax virus rules

(Alliance News) - Blue chip equities in Europe surged on Wednesday, with the London market getting a boost from travel and leisure stocks on news that UK virus isolation rules could be relaxed.

Equities in New York had a strong start as the earnings calendar continues, with entertainment company Walt Disney reporting later.

The FTSE 100 index ended up 76.35 points, or 1.0%, at 7,643.42, a two-year closing high. The mid-cap FTSE 250 index jumped 396.55 points, or 1.8%, at 22,184.01. The AIM All-Share index closed up 12.58 points, 1.2%, at 1,095.06.

The Cboe UK 100 index ended up 1.1% at 758.76. The Cboe 250 jumped 2.0% at 19,829.55 and the Cboe Small Companies ended 1.8% higher at 15,589.15.

In mainland Europe, the CAC 40 stock index in Paris rose 1.5% and the DAX 40 in Frankfurt surged 1.6%.

Stocks in New York also rallied. The Dow Jones Industrial Average was 0.9% higher at the time of the closing bell in London. The S&P 500 was up 1.2%, while the Nasdaq Composite jumped 1.5%.

The FTSE's gains were more measured compared to European counterparts, though London's blue-chip index has largely outperformed peers so far this year.

Markets so far in 2022 have struggled with equities hurt as central banks look to normalise monetary policy to stem rampant inflation.

Though inflationary pressures remain all the same, and as investors continue to bet on rate hikes at the Federal Reserve and European Central Bank, equity markets still had a spring in their step on Wednesday.

Oanda analyst Craig Erlam commented: "It's hard to pinpoint exactly what has changed; whether it's earnings that are lifting the mood or the soothing tones of central bankers desperately trying to manage expectations. Perhaps it's simply a case of investors coming to terms with the tightening environment and feeling more comfortable with it.

"Whatever the reason, investors certainly appear encouraged by the fact that the falling knife period looks to be in the rear-view mirror and we're now seeing signs of stabilization. In recent week's we've also seen periods of aggressive selling being bought into which has helped create the impression that the worst is behind us."

In the central banking space, Bank of England's chief economist has called for a more measured and "steady handed" approach to raising UK interest rates amid uncertainty over sky-high energy prices and inflation.

In a speech to the Society of Professional Economists, Huw Pill warned against "unusually large policy steps" as he explained his move to join the majority on the Bank's Monetary Policy Committee in voting for a quarter point rise to 0.5%.

But Pill, who replaced Andy Haldane in the role last September, said: "Restricting ourselves to a 25 basis points now – albeit with the prospect of more to come in the coming months – is an investment in containing market expectations of aggressive 'activism' that I saw as worth making. That is what I would label a 'steady handed' approach to monetary policy."

The pound was quoted at USD1.3551 late Wednesday, unchanged from the London equities close Tuesday. Sterling had hit an intraday high of USD1.3588 during what has been a largely weaker session for the dollar.

The euro was priced at USD1.1437, rising from USD1.1413 late Tuesday. Against the Japanese yen, the dollar was trading at JPY115.44, lower from JPY115.60.

In London, travel and leisure stocks were lifted by news UK Prime Minister Boris Johnson has signalled that laws requiring people in England with Covid-19 to self-isolate will be lifted within weeks.

The prime minister said he will present his plan for "living with Covid" when Parliament returns from a short recess on February 21.

And he indicated that, as long as the data remains positive, the legal duty to self-isolate will be lifted a month earlier than planned.

Stocks with an exposure to the peaks and troughs of the UK economy got a lift on Wednesday.

British Airways parent International Consolidated Airlines Group climbed 3.8%, picture house operator Cineworld rose 7.4% while transport operator Stagecoach added 4.2%.

Gambling stocks Entain, which owns Ladbrokes, and 888 Holdings added 2.5% and 5.8%. Covid-19 isolation measures have frequently hit the UK sporting calendar since the virus first emerged.

Smurfit Kappa closed up 2.0%. The corrugated packaging company reported a strong performance for 2021 and raised its dividend.

For 2021, revenue was up 18% to EUR10.11 billion from EUR8.53 billion in 2020, and pretax profit was EUR913 million, up 22% from EUR748 million.

Mondi added 3.5% in a positive read across.

Elsewhere in London, John Menzies shares took off, closing 38% higher at 462.89 pence, implying a market capitalisation of GBP425.40 million. The aviation-services provider rejected a GBP468.7 million takeover approach from a subsidiary of Kuwaiti logistics firm Agility Public Warehouse Co.

John Menzies said the approach was for 510.00p per shares in cash, up from a previous tilt of 460.00p.

Having considered the offer, Menzies said the proposal was "entirely opportunistic, conditional and that the terms fundamentally undervalue Menzies and its future prospects".

Brent oil was quoted at USD91.90 a barrel late Wednesday, up from USD90.28 late Tuesday. Gold stood at USD1,830.69 an ounce, marginally higher against USD1,825.73.

Thursday's economic calendar has US inflation data and the latest jobless claims reading at 1330 GMT.

Consumer goods firm Unilever and pharmaceutical firm AstraZeneca are due to report annual results on Thursday. Postal service provider Royal Mail reports a trading statement.

By Eric Cunha; ericcunha@alliancenews.com

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