The FTSE 100 surged on Tuesday as the gloom around US interest rates reversed, and China was reportedly considering unleashing a wave of stimulus.
The FTSE 100 rallied 1.6% to trade at 7,611 at the time of writing. The rally was broad, with 98 of the FTSE 100’s constituents trading positively.
“Investors regained their appetite for risk after a troublesome start to the trading week linked to concerns about conflict in the Middle East and how the associated hike in commodity prices could feed through to inflation and interest rates staying higher for longer,” said Russ Mould, investment director at AJ Bell.
“Triggering the U-turn in the market mood were comments on Monday from Fed Vice Chair Philip Jefferson who implied the US central bank needed to ‘proceed carefully’ with any further rate hikes. This raised hopes in the market that the Fed might not need to lift rates any higher, particularly if higher bond yields were already threatening to act as an anchor on economic activity.”
Already improving sentiment on the back of US rates hopes received an additional boost from reports China was mulling actions to help stimulate the economy.
Bloomberg reported China was exploring the issuance of 1 trillion yuan ($137 billion) in government debt to be spent on major infrastructure projects.
The prospect of significant construction projects in China fired up the FTSE 100’s natural resources, with miners Anglo American, Antofagasta and Rio Tinto enjoying solid gains. Prudential jumped 3.9% on hopes of better trading conditions in China.
The risk-on sentiment in equities was reflected in a 6% rally for Ocado, the FTSE 100’s top riser.
Spirax-Sarco was the top faller after JP Morgan analysts cut their price target to 11,100p from 11,500p.