On Tuesday, the FTSE 100 enjoyed the upside from speculation China could soon unleash a wave of stimulus into their economy as the world’s second largest economy continues a stuttering recovery from the pandemic.
China consumer prices released over the weekend highlighted the inconsistencies in the Chinese economy and analysts are now looking forward to intervention by the authorities.
Investors positioned themselves in constituents of the natural resource heavy FTSE 100 on Tuesday and sent the index as high as 7,800, before falling back to trade at 7,762 at the time of writing.
The prospect of greater demand for base metals including copper and iron ore helped lift diversified miners including Rio Tinto, Anglo American and Glencore.
Copper miner Antofagasta was the FTSE 100’s top riser, gaining 3.4%.
“UK markets returned from the Easter break with a real spring in their step, helped a positive end to yesterday’s trading session on Wall Street,” said AJ Bell investment director Russ Mould.
“While the latest economic data from China has been weak, that provides both the incentive and the ability to ease monetary policy and launch stimulus spending in areas like infrastructure to help revive growth.
“Mining stocks helped power the FTSE 100 higher as investors reacted to the possible implications for demand. Firmer oil prices lifted BP and Shell, the former of which announced a partnership with smaller peer Harbour Energy to develop a carbon capture project in the Humber estuary.”
Cyclical rally
The FTSE 100 has gradually recovered from the post banking crisis low with each trading day since displaying pronounced strength in either defensive or more cyclical stocks.
Today it was the turn of the cyclicals. In addition to gains in mining companies, there was also interest in housebuilders, retailers and financials.
Having recorded a closing low of 7,335 in March, the index has now rebounded around 5% and breached the 50-day moving average on Tuesday.