The FTSE 100 Index jumped 8% today as hopes for another round of interest rate cuts led to the third biggest gain in the benchmark’s history.
Around £76bn (€97bn) was added to the value of UK blue-chips in the dramatic rebound. Financial stocks led the advance as the Footsie closed up 316.2 points at 4242.5.
Shares surged worldwide after speculation of a half point reduction by the Federal Reserve caused the Dow Jones Industrial Average to make its second biggest points gain in history on Tuesday, with a further rise of more than 1% today.
The rally in London was focused on those sectors which have borne the brunt of the market’s previous falls. Norwich Union parent Aviva rose 25% or 65p to 324p as investors also drew on a comforting trading update from the life and pensions giant earlier in the week.
Sector counterpart Prudential also benefited from the wider rally, ahead 19%, or 47p at 295.25p.
Standard Chartered bank has been hit by worries over the state of emerging markets, but shares recovered 210p to 910p, a rise of 30%. Sentiment also improved towards HBOS, which cheered 19.4p to 88p, and Royal Bank of Scotland, up 7.2p to 64p.
Hopes of a half-point interest rate cut in the UK next week boosted prospects for a number of retailers. Next rose 111p to 1011p, while in the FTSE 250 Index, Debenhams soared 22%, or 5.75p to 31.75p and Comet owner Kesa Electrical improved 9.25p to 69.25p.
Energy and commodity firms were also higher after oil prices gained on expectations that rate cuts will prop up economic output. BP, which rose sharply in the wake of third quarter results yesterday, added another 10% or 44.25p to 505.75p. Royal Dutch Shell gained 180p to 1670p ahead of its own quarterly figures tomorrow.
There were only a handful of stocks on the fallers board, including Friends Provident as the stock gave back a slice of the strong gains seen at the end of the previous session. Friends was down 8% or 5p at 60p.
Transport group Stagecoach was among others under pressure, down 13.3p to 192.2p, despite reassuring that trading was in line with expectations. It reported like-for-like revenues growth of 9.2% for the UK bus arm, with growth in South West Trains also holding up well.
Tesco struggled to make headway for a while after an analyst at Shore Capital reported that UK’s biggest retailer was internally budgeting for like-for-like sales growth of 2% in the UK – compared to its usual guidance of 3% to 4%. Shares were later 13.7p higher at 332.3p.
In the second tier, Swiss miner Ferrexpo was bucking today’s wider sector rises with a 25% plunge, down 13.5p to 39.5p, after it warned that weak steel demand will cause full-year sales to be lower than expected and announced its boss was quitting.
The biggest Footsie risers were Old Mutual ahead 11.8p at 50.8p, Standard Chartered up 210p at 910p, HBOS up 19.4p at 88p and Admiral Group up 221.5p at 1090p.
The biggest Footsie fallers were Friends Provident down 5p at 60p, Stagecoach Group off 13.3p at 192.2p, Liberty International down 12p at 620.5p and FirstGroup down 2p at 417.25p.