London close: Stocks book solid gains as sterling recovers

London stocks closed well above the waterline on Tuesday amid hopes of a less hawkish policy stance from the US Federal Reserve, and even after chancellor Kwasi Kwarteng debunked earlier reports that he was bringing forward the publication of his debt-reduction proposals.

The FTSE 100 ended the session up 2.57% at 7,086.46, and the FTSE 250 was ahead 3.11% at 17,822.15.

Sterling was in a mixed state, meanwhile, last trading up 0.95% on the dollar at $1.1431, while it weakened 0.48% against the euro to change hands at €1.1470.

“The pound has continued its upward trajectory as concerns ease as gilt markets continue to cool,” said IG senior market analyst Joshua Mahony.

“While markets appear to have reacted positively to the chancellor's 45p tax rate u-turn, today has seen Kwarteng flip-flop once again by returning to his original stance that the OBR forecast will only come in late-November.”

Mahony said that while the pound gained ground against the dollar, it was largely a reflection of a wider improvement in risk sentiment.

“Notably, euro-sterling has started reversing upwards for the first time in over a week, with the post budget recovery for sterling seemingly losing energy.”

Sentiment got a boost after weak US manufacturing data released on Monday sparked hopes the Federal Reserve may have to rein in its hawkish stance on interest rate hikes.

On home shores, meanwhile, chancellor Kwasi Kwarteng said that his medium-term fiscal plan would be published on 23 November, as previously planned.

Speaking at the Tory party conference in Birmingham on Monday, Kwarteng said that the publication of the plans would happen "shortly".

Subsequent reports from the BBC and Financial Times suggested the publication could be brought forward to later this month.

However, asked in an interview with GB News on Tuesday what he meant by "shortly", Kwarteng said: "shortly is the 23rd … it's going to be the 23rd of November.”

In economic news, British shoppers looked set to cut festive spending by more than £4bn this Christmas according to research published earlier, as the cost of living crisis squeezed budgets.

According to a report from consultancy Retail Economics and Metapack, 70% of British shoppers were planning on cutting back on non-food spending "to some extent" in the last three months of the year.

Overall, British consumers were likely to spend £4.4bn less on non-essentials, down 22% on the same period a year previously.

The last three months of the year are crucial for most retailers, as consumers splash out on food, presents and homewares.

“Inflation is set to peak at exactly the wrong time for retailers,” said Richard Lim, chief executive of Retail Economics.

“Consumers are concerned, budgets are under pressure, and households are intending to cut back this year as they struggle to make ends meet.

“Against this weakening consumer backdrop, retailers are also facing a pincer movement of rising input and operating costs which is testing business models to breaking point.”

On the continent, producer prices jumped in the eurozone in August according to official data, as energy costs mounted.

Eurostat, the European Union’s statistical office, said industrial producer prices rose 5.0% in August compared with July, and by 4.9% across the wider bloc.

In July, prices jumped 4.0% in the eurozone and 3.7% in the EU.

Annually, prices surged 43.3% compared to August 2021 and by 43.0% in the EU.

Finally on data, demand for workers in the US weakened in August, leading to further uncertainty on the outlook for the jobs market.

According to the US Department of Labor, the number of job openings fell at a month-on-month pace of 10% to reach 10.05 million, below the 11.09 million markets were expecting.

It marked the largest drop since April 2020 with the previous larger decline seen in July 2009, Ian Shepherdson at Pantheon Macroeconomics pointed out.

Hiring, meanwhile, increased 0.1% versus July to reach 6.28 million, while so-called voluntary separations or 'quits' grew 2.5% to 5.98 million.

On London’s equity markets, insurer Legal & General Group gained 6.08% after its said its investment arm had no exposure to recent turmoil in the liability-driven investment (LDI) market caused by Kwarteng's mini-budget.

The company also said it expected full-year operating profit to be up in line with the first half of 8%, along with annual capital generation of £1.8bn.

Sector peers were also in the green, with Phoenix Group up 4.9%, Prudential rising 7.16% and Aviva 3.07% firmer.

HSBC rose 4.54% following a report it was exploring a multibillion pound sale of its operations in Canada, in what would mark a significant retreat from North America.

According to Sky News, HSBC's board had instructed investment bankers at JP Morgan to sound out prospective buyers of its business in the country.

High street bakery chain Greggs surged 10.27% after it said total sales were up 14.6% over the 13 weeks ended 1 October, putting it on track to meet full-year expectations.

In broker note action, Hargreaves Lansdown added 6.91% after an upgrade to ‘hold’ at Jefferies, while National Grid closed 0.17% lower despite an upgrade to ‘neutral’ at Citi.

Pennon Group and Severn Trent were up a respective 2.52% and 1.75%, after upgrades to ‘outperform’ at RBC Capital Markets.

On the downside, Drax Group tumbled 5.31%m after BBC Panorama claimed in an investigation aired on Monday that the company was "cutting down trees in ancient forests important for fighting climate change".

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,086.46 2.57%
FTSE 250 (MCX) 17,822.15 3.11%
techMARK (TASX) 4,215.01 2.08%

FTSE 100 - Risers

Flutter Entertainment (CDI) (FLTR) 10,670.00p 9.24%
Ocado Group (OCDO) 507.00p 8.87%
Intermediate Capital Group (ICP) 1,083.50p 8.37%
International Consolidated Airlines Group SA (CDI) (IAG) 101.06p 7.90%
Hargreaves Lansdown (HL.) 922.60p 7.33%
Prudential (PRU) 946.20p 7.23%
Whitbread (WTB) 2,478.00p 6.90%
Rolls-Royce Holdings (RR.) 73.93p 6.74%
Melrose Industries (MRO) 107.70p 6.53%
Entain (ENT) 1,157.50p 5.95%

FTSE 100 - Fallers

Centrica (CNA) 71.40p -0.92%
SSE (SSE) 1,560.00p -0.83%
Aveva Group (AVV) 3,175.00p -0.38%
British Land Company (BLND) 354.50p -0.37%
SEGRO (SGRO) 754.00p -0.34%
National Grid (NG.) 931.40p -0.21%
Land Securities Group (LAND) 530.00p -0.19%
Dechra Pharmaceuticals (DPH) 2,630.00p -0.15%
Harbour Energy (HBR) 450.90p 0.40%
British American Tobacco (BATS) 3,258.50p 0.45%

FTSE 250 - Risers

Just Group (JUST) 64.80p 11.34%
Liontrust Asset Management (LIO) 828.00p 11.14%
Greggs (GRG) 1,901.00p 10.33%
Currys (CURY) 64.50p 10.26%
AJ Bell (AJB) 306.40p 9.98%
Warehouse Reit (WHR) 124.00p 9.73%
ICG Enterprise Trust (ICGT) 1,080.00p 9.20%
TUI AG Reg Shs (DI) (TUI) 114.95p 9.01%
Ferrexpo (FXPO) 132.80p 8.32%
Auction Technology Group (ATG) 776.00p 7.93%

FTSE 250 - Fallers

Drax Group (DRX) 571.00p -5.23%
Balanced Commercial Property Trust Limited (BCPT) 79.20p -2.10%
Aston Martin Lagonda Global Holdings (AML) 107.55p -2.09%
Derwent London (DLN) 2,022.00p -1.94%
Hikma Pharmaceuticals (HIK) 1,338.00p -1.44%
Home Reit (HOME) 88.70p -1.33%
LondonMetric Property (LMP) 177.90p -0.95%
Tritax Eurobox (GBP) (EBOX) 63.40p -0.94%
Assura (AGR) 53.80p -0.92%
Primary Health Properties (PHP) 111.70p -0.89%