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FTSE 100 surges higher on Chinese stock market intervention

The FTSE 100 surged higher on Tuesday with China-focused stocks doing most of the heavy lifting after the Chinese authorities stepped in to prop up their depressed equity markets.

London’s leading index was 0.55% higher at the time of writing, with names such as HSBC, Prudential and Antofagasta among the top risers.

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BP was the top riser after following in Shell’s footsteps in announcing a considerable share buyback even though profits fell in the last year.

“The big story on the markets was the sharp rally in Chinese stocks after a state-backed initiative to stir up interest in equities,” said Russ Mould, investment director at AJ Bell.

“The Hang Seng advanced 4% and the SSE jumped 3.2%, some of the biggest one-day gains we’ve seen on the Chinese market in a long time. The Hang Seng Tech index did even better, soaring by 7%.

“A state-owned investment fund indicated it would continue to buy up shares in what looks like a concerted effort to breathe some new life back into Chinese equities after they fell out of favour. The securities regulator also pledged to encourage more long-term funds to buy shares and to encourage companies to buy back more of their own shares.”

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The Miners are the most obvious beneficiaries of Chinese stimulus, and the sector posted respectable gains but didn’t run away with itself as the measures were focused on the stock markets rather than the economy. Antofagasta added 1.2% and Rio gained 0.3%. Glencore slipped 0.3% signalling slight disappointment China wasn’t doing more to support the underlying economy and demand for commodities.

On the other hand, HSBC and Prudential, who are more concerned with China’s financial system, gained 1.8% and 2.7%, respectively. HSBC, as the FTSE 100’s third largest company, would have added a significant number of points to the index.

BP was the FTSE 100’s top riser, jumping 5.8%, as the oil major revealed another share buyback that caught investor’s attention. Profits nearly halved as the firm readjusted to lower oil prices, and refining margins were hit.

“The priorities of BP’s new CEO Murray Auchincloss have been made clear. Although on appointment he pledged that BP’s strategy to transition from an international oil company to an integrated energy company was unchanged, the big share buy-back announcement shows the immediate focus is on boosting the share price and returning value to shareholders.

“BP also said that shareholders would get a further $3.5 billion in buybacks in the months to come, and more in 2025.

“This strategy is being pursued even though BP reported a sharp drop in underlying annual profit from $27.7 billion to $13.8 billion as oil and gas prices were lower and refining profit margins also weakened.”

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