LONDON MARKET CLOSE: Oil Majors And Banks Ignite FTSE 100 Rally

(Alliance News) - Stocks in London powered higher on Wednesday thanks to strong gains from oil majors and banks, while the Democratic Party's likely takeover of the Senate boosted US equity markets.

On the continent, the EU's medicines watchdog approved a coronavirus jab by US firm Moderna, giving a shot in the arm for Europe's slow-moving vaccine roll-out.

The FTSE 100 index closed up 229.61 points, or 3.5%, at 6,841.86. The mid-cap FTSE 250 ended up 255.79 points, or 1.2%, at 20,973.16. The AIM All-Share closed up 4.10 points, or 0.4%, at 1,172.47.

The Cboe UK 100 ended up 3.9% at 682.56, the Cboe UK 250 closed up 1.5% at 18,295.84 and the Cboe Small Companies ended up 1.4% at 11,923.62.

In Paris, the CAC 40 ended up 1.4%, while the DAX 30 in Frankfurt ended up 2.0%.

"The FTSE 100 continues to outperform its eurozone equivalents as the rally in oil stocks has boosted the UK index. The mood in Europe is positive across the board but the strong contribution of Royal Dutch Shell and BP to the FTSE 100 in terms of index points has given it a big advantage over the other markets," said CMC Markets analyst David Madden.

In the FTSE 100, banks ended as the best performers after the yield on US Treasuries rose to 1.0% for the first time since March, with Democrats on course for control of the Senate.

HSBC closed up 9.9%, Standard Chartered, up 9.5%, Barclays, up 8.3% and NatWest, up 6.6%.

"There are important implications for the markets evidenced by the US 10yr Treasury yield breaking above 1% for the first time in nine months, whilst the dollar made fresh lows. Markets have a habit of overreacting to news but we should consider what a shift in Washington will mean. Meanwhile the FTSE 100 rose for a third day as the oil majors rallied firmly again and banks got a lift from the higher yield curve picture," said Markets.com's Neil Wilson.

Oil majors BP, Royal Dutch Shell 'A' and 'B' shares closed up 6.4%, 5.9% and 7.0% respectively tracking spot oil prices higher.

Brent oil was quoted at USD54.22 a barrel at the equities close, up sharply from USD53.01 at the close Tuesday, trading at its highest levels since last February.

Oil prices shot higher on Tuesday following Saudi Arabia's surprise announcement that it would trim production.

"The outcome of the OPEC+ meeting was a welcome surprise for the oil markets, with Russia and Kazakhstan sharing a small increase in production of 75,000 but Saudi Arabia committing to a one million barrel per day cut. So not only will there be no effective increase but the outcome represents a substantial cut," said Oanda Markets analyst Craig Erlam.

At the other end of the large caps, Bunzl ended down 0.8% after Credit Suisse downgraded the distribution firm to Underperform from Neutral.

Meanwhile, the pound's volatile start to 2021 was continuing after UK Prime Minister Boris Johnson placed England into a third national lockdown, which looks set to inflict further damage on the domestic economy.

The pound was quoted at USD1.3570 at the London equities close, down from USD1.3611 at the close Tuesday.

"The pound has failed to display much of a relief rally in the wake of the pre-Christmas trade deal between the UK and the EU with the rise of Covid-19 cases and greater restrictions on the UK economy becoming a concern," said analysts at Rabobank.

On the economic front, the UK's services sector rounded off a difficult final quarter with another month of decline, as it continues to be hit by Covid-19 restrictions.

The headline seasonally adjusted IHS Markit/CIPS UK Services purchasing managers' index posted 49.4 in December, though an improvement from 47.6 in November, it was still below the 50.0 mark which separates growth from decline.

The euro stood at USD1.2275 at the European equities close, marginally lower from USD1.2280 late Tuesday.

The eurozone's private sector contracted at a slower pace in December, though the performance lagged below initial estimates, data showed.

The IHS Markit eurozone composite output index rose to 49.1 in December, from 45.3 in November. Though still below the 50.0 no-change mark, the numbers suggest the single currency area's private sector declined at a slower pace.

The eurozone services business activity index rose to 46.4 in December, from 41.7 in November. The final figure was below the 47.3 flash estimate, however.

Against the yen, the dollar was trading at JPY103.37, up from JPY102.75 late Tuesday.

Stocks in New York were higher at the London equities close on prospective runoff election wins by Democrats that should help incoming US President Joe Biden enact his economic plans.

The DJIA was up 1.6%, the S&P 500 index up 1.0% and the Nasdaq Composite up 0.2%.

In the US state of Georgia, Biden's party was the declared winner in one of the races and narrowly ahead in the other race, boosting speculation a public works spending package could be enacted.

Democratic candidate Raphael Warnock, the pastor at the Atlanta church where Martin Luther King once preached, was projected to defeat Republican Kelly Loeffler, a 50-year-old businesswoman appointed to the Senate in December 2019.

Loeffler however refused to concede. "We're going to make sure every vote is counted," she told supporters.

In the other Georgia race, Democrat Jon Ossoff, a 33-year-old video producer, claimed victory on Wednesday over Republican David Perdue.

Gold was quoted at USD1,907.65 an ounce at the London equities close, lower against USD1,947.54 late Tuesday.

The economic events calendar on Thursday has UK construction PMI at 0930 GMT, eurozone inflation data at 1000 GMT and the latest US jobless claims figures at 1330 GMT.

The UK corporate calendar on Thursday has a trading statement from pub operator Mitchells & Butlers.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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