London close: Stocks rise after Fed cuts rates, but finish off best levels

London stocks finished higher again but well off their best levels even after the US central bank, in a rare move in between its regularly-scheduled policy meetings, slashed its short-term interest rates.

By the end of the day, the FTSE 100 had gained 0.95% to stand at 6,718.20, while the FTSE 250 ended the session up by 1.97% at 19,682.65.

Analysts at Jefferies said the Fed's decision was the result of the stockmarket selloff during the previous week and financial markets' poor response to a G7 communique released earlier on Tuesday, in which some of the world's most advanced economies committed to defending growth - although their joint statement was short on details.

"If the risk markets refrain from a resumption of last week’s debacle, the Fed will hold tight and wait for evidence of the effect of COVID-19 on the economy. The markets are likely to enter a "we want more" mode, and that is the primary risk at this point," Jefferies said.

"It is now time for the administration to take some steps to provide support for sectors most adversely affected by COVID-19 and also provide stimulus in some form of a tax cut or some sort of creative direct lending program to businesses that are disrupted by the virus," the broker added.

"That may be difficult to do in an election year, but it is unlikely that the president will let partisan election year politics stop him."

Tuesday marked just the seventh time since the turn of the century that the Fed had cut rates in between meetings.

Other instances when it had done so included January 2001, once the so-called 'tech bubble' had burst, following the 9-11 terrorist attacks and late 2008 after US investment bank Lehman Brothers imploded.

To take note of, in the backgrund there was some 'market chatter' regarding the possibility of an outright contraction in global GDP growth in 2020, something which had only been seen once in the last half century, in 2009.

The day before the Organisation for Economic Cooperation and Development cut its global 2020 GDP forecast from 2.9% to 2.4% and said that if the COVID-19 coronavirus spread across Asia, Europe and the US then growth could fall to as low as 1.5%.

At the global level, growth below 2.0% is considered a recession, yet a pace of expansion of 1.5% would only be the slowest since the early 1990's according to World Bank data.

In equity markets, housebuilders were on the rise, with Persimmon and Taylor Wimpey racking up strong gains after the release of an upbeat UK construction survey, which showed that the sector rallied last month as Brexit-related political and economic uncertainty eased and new orders surged.

The IHS Markit/CIPS UK construction total activity index rose to 52.6 in February from 48.4 in January, comfortably beating consensus expectations for a reading of 49.0. It was also the first time since April 2019 that the index had come in ahead of the neutral 50.0 mark.

The overall rate of construction output growth was the fastest for 14 months, while new orders increased at the sharpest pace since December 2015.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The election has given housebuilding a new lease of life. The pick-up in the construction PMI to its highest level since December 2018 marks another milestone in the economy’s post-election recovery."

Elsewhere, travel company TUI and British Airways and Iberia parent IAG pushed higher, having fallen sharply on Monday.

4Imprint, Apax, Aggreko and Rotork all traded up after results, but equipment rental firm Ashtead was on the back foot after mixed results.

Market Movers

FTSE 100 (UKX) 6,718.20 0.95%
FTSE 250 (MCX) 19,682.65 1.97%
techMARK (TASX) 3,841.79 1.25%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 464.40p 7.23%
M&G (MNG) 202.60p 4.65%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,090.00p 4.50%
Legal & General Group (LGEN) 265.10p 4.17%
Evraz (EVR) 329.40p 4.09%
Experian (EXPN) 2,806.00p 3.88%
Scottish Mortgage Inv Trust (SMT) 605.50p 3.86%
Polymetal International (POLY) 1,266.00p 3.64%
Persimmon (PSN) 2,942.00p 3.56%
SEGRO (SGRO) 861.60p 3.48%

FTSE 100 - Fallers

Barclays (BARC) 139.56p -2.61%
Hargreaves Lansdown (HL.) 1,519.50p -2.28%
Morrison (Wm) Supermarkets (MRW) 175.25p -2.22%
Standard Chartered (STAN) 536.80p -2.22%
HSBC Holdings (HSBA) 509.80p -1.98%
Lloyds Banking Group (LLOY) 48.68p -1.75%
GlaxoSmithKline (GSK) 1,608.00p -1.35%
Royal Bank of Scotland Group (RBS) 170.45p -1.19%
Glencore (GLEN) 191.26p -1.07%
Hikma Pharmaceuticals (HIK) 1,879.50p -1.03%

FTSE 250 - Risers

4Imprint Group (FOUR) 3,130.00p 15.07%
Rotork (ROR) 304.40p 9.61%
Sirius Minerals (SXX) 4.67p 7.70%
HarbourVest Global Private Equity Limited A Shs (HVPE) 1,732.00p 7.18%
Trainline (TRN) 475.50p 6.97%
Apax Global Alpha Limited (APAX) 161.00p 6.27%
Sirius Real Estate Ltd. (SRE) 85.00p 6.12%
Hochschild Mining (HOC) 174.30p 5.83%
Genus (GNS) 3,416.00p 5.69%
IG Group Holdings (IGG) 719.20p 5.58%

FTSE 250 - Fallers

Ibstock (IBST) 253.00p -10.05%
Hunting (HTG) 302.00p -7.25%
PureTech Health (PRTC) 295.00p -5.94%
Hiscox Limited (DI) (HSX) 1,206.00p -5.49%
Playtech (PTEC) 242.50p -4.19%
Stagecoach Group (SGC) 120.30p -3.90%
SIG (SHI) 60.70p -3.42%
Dixons Carphone (DC.) 115.00p -3.32%
Cineworld Group (CINE) 133.95p -3.25%
Petrofac Ltd. (PFC) 299.80p -3.13%