(Alliance News) - Stocks in London ended sharply higher on Thursday ahead of the long Easter weekend buoyed by stimulus measures from the US Federal Reserve.
Closer to home, the UK government said it has expanded its overdraft with the Bank of England to ensure it has sufficient cash to cope with disruption caused by coronavirus. It said the central bank will directly finance the extra spending the government needs on a temporary basis.
The Treasury and the Bank of England said, in a joint statement, that it would minimise the need to raise additional funding from bond markets or currency markets.
Downing Street said the Bank of England's temporary extension of the use of Ways & Means is to smooth Government cash flows.
The FTSE 100 index closed up 164.93 points, or 2.9%, at 5,842.66.
The FTSE 250 ended up 545.69 points, or 3.4%, at 16,407.92, and the AIM All-Share closed up 18.03 points, or 2.5%, at 745.61.
The Cboe UK 100 ended up 3.1% at 9,883.25, the Cboe UK 250 closed up 3.6% at 14,141.23, and the Cboe Small Companies ended up 2.8% at 8,504.97.
In Paris the CAC 40 ended up 0.6%, while the DAX 30 in Frankfurt ended up 2.2%.
Stocks in New York were higher at the London equities close after the US Federal Reserve unveiled another round of massive stimulus.
The DJIA was up 1.8%, the S&P 500 index up 1.9% and the Nasdaq Composite up 0.8%.
The central bank said it will provide up to USD2.3 trillion in loans to support the US economy through the Covid-19 pandemic.
The funding will aid households and businesses of all sizes, the Fed said, as well as helping local governments.
"The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible," said Fed Chair Jerome Powell.
The Fed will help state and local governments manage "cash flow stresses" caused by the pandemic by establishing a 'municipal liquidity facility' that will offer up to USD500 billion in loans.
CMC Markets analyst Michael Hewson said: "The upshot of today's actions has been to see markets here in Europe finish the week on their highs as central banks start to move into the role of not only lender of last resort, but banker of last resort, as well as implement policy hand in glove with the US Treasury. Today's momentum has seen the FTSE 100, FTSE 250 and German DAX all reach their best levels in almost four weeks.
"With the Bank of England also moving in that direction with the implementation of its new 'ways and means' financing of the UK government, you can almost hear the sounds of the helicopter blades starting to speed up, as the evidence of the coronavirus crisis starts to make its presence felt. All of this extra stimulus has helped overshadow the fact that there is little likelihood in the short term that the current lockdown measures will be lifted. The continued rise in the death toll, in the UK as well as across Europe suggests restrictions are likely to remain in place, at least until the end of the month."
The US is now the hardest hit country by the pandemic. On Wednesday, for the second straight day, the US recorded nearly 2,000 deaths.
There has also been a week of record tolls in the UK, where Prime Minister Boris Johnson spent a fourth night in intensive care, his condition said to be improving.
"The prime minister had a good night and continues to improve in intensive care at St Thomas' Hospital. He's in good spirits," a Downing Street spokesman said.
On the London Stock Exchange, Just Eat Takeaway.com ended the best blue-chip performer, up 11% after the takeout delivery platform reported a 50% rise in first-quarter sales.
For the quarter ended March 31, Takeaway.com said orders jumped 50% to 46.7 million from 31.1 million in the first quarter of 2019.
The company attributed the rise to increased demand for food deliveries due to the lockdown measures imposed to slow the spread of the novel coronavirus.
Dutch food delivery firm Takeaway merged with UK-based Just Eat earlier this year. However, the two businesses are being run independently as the UK Competition & Markets Authority investigates the merger.
As such, the figures released Thursday only relate to Takeaway's business and do not factor in Just Eat's. They cover sales in the Netherlands, Germany and "other leading markets", the company said.
Next closed up 9.7% after Liberum restarted coverage on the clothing retailer with a Buy rating.
Diageo closed up 4.4% despite the distiller halting its share buyback scheme as part of Covid-19-related cost cuts, but will pay its planned interim dividend.
The Johnnie Walker whiskey maker and Guinness beer brewer said its 27.41 pence interim payout will go ahead as planned. The second phase of a USD4.5 billion three-year shareholder returns programme will not, however. Diageo back in July of last year said it planned to distribute up to GBP4.5 billion over a three-year period. So far, it has returned GBP1.25 billion as part of that scheme.
Turning to recent trading, Diageo said it has noticed a "very slow" recovery at on-trade channels, so restaurants and bars, in mainland China, as Covid-19 lockdown curbs ease. In both Europe and North America, Diageo noted a pick-up in sales in retail stores over recent weeks, though added it is uncertain whether this trend will continue.
The pound was quoted at USD1.2455 at the London equities close, up sharply from USD1.2390 at the close Wednesday, as the greenback tanked following two straight weeks of jobless claims in the millions.
US initial jobs claims stayed at a historically elevated level in the week ended April 4, though edged down from the week before, the Department of Labor showed on Thursday.
Seasonally adjusted initial claims were 6.61 million for the week to April 4, down 261,000 from the previous week's revised level. Consensus estimates had seen the latest reading much lower at 5.25 million.
The previous week, which had marked a record high for the series, was revised upwards by 219,000 to 6.87 million from 6.65 million.
Sterling recovered from an intraday low of USD1.2358 reached in early trade after data showed the UK economy contracted in February even before the Covid-19 situation intensified in Europe.
For the month of February, gross domestic product fell by 0.1% month-on-month, missing expectations and reversing a 0.1% rise in January, data from the Office for National Statistics showed. Consensus had seen February's growth rate matching that of January.
The euro stood at USD1.0942 at the European equities close, up from USD1.0869 late Wednesday.
Meanwhile, European Central Bank President Christine Lagarde said it was vital the ministers hatch a plan big enough to meet the challenge, warning: "If not all countries are cured, the others will suffer."
European companies are also suffering under a public lockdown, which health experts say is vital to slow the virus' spread but has effectively frozen economic life.
Against the yen, the dollar was trading at JPY108.50, down from JPY108.80 late Wednesday.
Brent oil was quoted at USD33.18 a barrel at the London equities close, higher than from USD31.56 at the close on Wednesday, as a virtual meeting between OPEC and their allies to discuss production cuts gets underway.
Investors were hopeful Saudi Arabia and Russia could reach a new deal to cut oil output drastically in response to a collapse in global demand from the coronavirus.
"As the OPEC + virtual meeting kicks off, oil prices extended their gains after reports that Russia and Saudi Arabia have reached a deal on deep oil cuts and that OPEC ++ are talking about cuts as large as 20 million barrels per day. As is with every OPEC meeting, many plot twists are to be expected. It is clear no one wants to be short going into this meeting, but they might be ready to fade any major rally," said OANDA market analyst Edward Moya.
Gold was quoted at USD1,677.77 an ounce at the close, up from USD1,650.50 late Wednesday.
The economic events calendar on Friday has China inflation readings overnight.
Financial markets in the UK will be closed on Friday and will reopen on Tuesday in observance of the Easter holiday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Diageo (DGE)
Next (NXT)
Just Eat Takeaw (JET)