London close: Stocks finish higher on dovish Fed rhetoric

London markets enjoyed a buoyant session on Tuesday, closing with substantial gains after dovish comments from US Federal Reserve officials overnight signalled a potential pause to interest rate hikes.

The FTSE 100 closed up 1.82% at 7,628.21, and the FTSE 250 was ahead by 2.25% to settle at 17,967.67 points.

In currency markets, sterling was last up 0.39% on the dollar, trading at $1.2286, while it lost a marginal 0.08% against the euro, changing hands at €1.1572.

“Whether because of dovish Fed speak or modest haven demand for bonds, or most likely a bit of both, we’ve seen a sharp repricing when it comes to bond yields in the last couple of days,” said CMC Markets chief market analyst Michael Hewson.

“The big increase in yields seen in the aftermath of Friday’s payrolls report has disappeared, while stock markets have rebounded in the hope that the fallout from this weekend’s horrific events in Israel will be contained, at least for now.

“Consequently, yesterday’s weakness in European markets has been fully reversed with the DAX and FTSE 100 both rising to a one week high, despite the IMF lifting its inflation forecast for next year to 5.8%, and downgrading its growth forecast for the global economy to 2.9% from 3%.”

Mixed bag for retail and groceries amid cost-of-living crisis, milder weather

In economic news, September saw a significant deceleration in retail sales, according to the latest Retail Sales Monitor from the British Retail Consortium and KPMG, while budget supermarkets Aldi and Lidl managed to secure a larger market share despite the UK experiencing a 14-month low in grocery price inflation, as per research firm Kantar.

The retail sector saw a growth of 2.7% in September - a stark contrast to the 4.1% surge in August, impacted partially by an unseasonably mild September, which deterred seasonal clothing purchases.

That aligned with the three-month average but trailed the 12-month average growth at 4.2%.

Food sales swelled by 7.4% in the September quarter, while non-food items dipped by 1.2%.

A mere 0.3% uptick was recorded for in-store non-food sales over three months, juxtaposed with a 3.6% contraction in online non-food sales during the same period.

“Sales growth in September slowed as the high cost of living continues to bear down on households,” said BRC chief executive Helen Dickinson.

“Big ticket items such as furniture and electricals performed poorly as consumers limited spending in the face of higher housing, rental and fuel costs.

“The Indian summer also meant sales of autumnal clothing, knitwear and coats, have yet to materialise.”

In the grocery space, Aldi and Lidl enhanced their market share as the annual increase in UK grocery prices moderated to its lowest in over a year.

A reduction to 11% was noted in grocery price inflation over the four weeks ended 1 October, descending from 12.2% in the prior four weeks.

The exceptionally warm September bolstered the sales of summer favourites, as ice creams, burgers, and dips experienced upticks of 27%, 19%, and 10%, respectively.

However, an atypical drop was recorded in early festive season shopping, with Christmas puddings and seasonal biscuits declining by 14% and 29%, respectively.

“Grocery price inflation is still very high, but shoppers will be relieved to see the rate continuing to fall,” said Tom Steel, straight insight director at Kantar.

“For the first time since last year, the prices of some staple foods are now dropping, and that’s helping to bring down the wider inflation rate.

“Dairy was one of the categories where costs really shot up last autumn but the average price paid for a 250g pack of butter is now 16p less than 12 months ago.”

Sentiment was earlier boosted after Federal Reserve vice-chairman Philip Jefferson and Lorie Logan, president of the Dallas Fed, both indicated a careful consideration of higher bond rates influencing future policy decisions.

Jefferson, during a speech to the National Association for Business Economics, affirmed staying mindful of elevated bond rates in future policy evaluations, while Logan proposed that an uptick in bond rates might help the Fed in decelerating inflation.

Miners and financials in the black, Spirax-Sarco slides

On London’s equity markets, heavily weighted mining shares were among the day’s top performers.

Anglo American surged by 5.64%, Antofagasta by 4.84%, and Rio Tinto experienced a 2.3% uptick.

Barclays and NatWest Group were well-positioned in the financial arena, seeing gains of 3.33% and 3.16%, respectively.

Electricals retailer Currys ascended 5.36% following its revelation about receiving non-binding offers from several interested parties for its Greek business, Kotsovolos.

Energean - currently developing a gas field offshore Israel - advanced 8.6% in the energy sector, recuperating somewhat from a plunge on Monday provoked by concerns related to the Israel-Palestine conflict.

Online grocer Ocado Group leapt 6.79% after an upgrade to ‘outperform’ by analysts at Bernstein.

On the downside, Spirax-Sarco Engineering descended 2.02% after JPMorgan Cazenove reduced its price target on the overweight-rated shares to 11,100p, down from 11,500p.

Outside the FTSE 350, Irish convenience food producer Greencore soared 21.67% on declaring that its adjusted operating profit for 2023 would surpass current market expectations, landing between £74m and £76m.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,628.21 1.82%
FTSE 250 (MCX) 17,967.67 2.25%
techMARK (TASX) 4,201.24 2.30%

FTSE 100 - Risers

Ocado Group (OCDO) 600.00p 6.69%
Anglo American (AAL) 2,269.50p 5.63%
Flutter Entertainment (CDI) (FLTR) 13,640.00p 5.17%
Antofagasta (ANTO) 1,445.00p 4.48%
Entain (ENT) 962.00p 4.41%
Ashtead Group (AHT) 5,032.00p 4.40%
JD Sports Fashion (JD.) 144.15p 3.89%
Hargreaves Lansdown (HL.) 770.00p 3.83%
Land Securities Group (LAND) 602.60p 3.68%
Rolls-Royce Holdings (RR.) 212.30p 3.46%

FTSE 100 - Fallers

Spirax-Sarco Engineering (SPX) 8,888.00p -2.01%
Beazley (BEZ) 537.50p 0.00%
Dechra Pharmaceuticals (DPH) 3,790.00p 0.05%
Haleon (HLN) 340.00p 0.12%
Halma (HLMA) 1,920.00p 0.18%
Shell (SHEL) 2,663.00p 0.53%
Smiths Group (SMIN) 1,643.50p 0.83%
Airtel Africa (AAF) 120.10p 0.84%
GSK (GSK) 1,521.40p 0.88%
BP (BP.) 525.10p 0.92%

FTSE 250 - Risers

Playtech (PTEC) 419.60p 9.56%
Energean (ENOG) 933.50p 9.18%
Drax Group (DRX) 438.40p 6.93%
TUI AG Reg Shs (DI) (TUI) 437.00p 6.64%
Pennon Group (PNN) 658.50p 6.47%
Oxford Instruments (OXIG) 2,090.00p 6.09%
Carnival (CCL) 957.20p 5.79%
Spirent Communications (SPT) 98.50p 5.63%
Watches of Switzerland Group (WOSG) 533.50p 5.43%
888 Holdings (DI) (888) 94.25p 5.37%

FTSE 250 - Fallers

BH Macro Ltd. GBP Shares (BHMG) 370.00p -2.63%
Diversified Energy Company (DEC) 75.05p -1.25%
Bluefield Solar Income Fund Limited (BSIF) 110.20p -1.08%
Target Healthcare Reit Ltd (THRL) 74.50p -0.93%
Digital 9 Infrastructure NPV (DGI9) 38.80p -0.51%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 270.50p -0.18%
Foresight Solar Fund Limited (FSFL) 88.80p -0.11%
Syncona Limited NPV (SYNC) 122.80p 0.00%
Foresight Group Holdings Limited NPV (FSG) 400.00p 0.00%
SDCL Energy Efficiency Income Trust (SEIT) 61.10p 0.00%