London close: Stocks keep hold of gains through afternoon trading

The FTSE 100 ended the session up 1.02% at 7,371.46, and the FTSE 250 was 0.9% firmer at 21,645.71.

Sterling was also keeping its head above water, last trading 0.01% stronger on the dollar at $1.3490, and gaining 0.41% against the euro to €1.1958.

“Despite some wobbles throughout the day the FTSE 100 has managed to hold on to most of yesterday’s rebound,” said IG chief market analyst Chris Beauchamp.

“Signs of a recovery in metals and oil have boosted the relevant sectors in the index, while higher yields have done their bit to lift bank stocks once again.

“It is far too early to say if this European outperformance versus the US is here to stay - we have had plenty of false dawns in recent years - but if the shift away from tech and other growth names really gets going a different market environment could be upon us, one where US outperformance is not a given.”

In economic news, UK government borrowing fell more than expected in December thanks to improved tax revenues, according to figures released earlier by the Office for National Statistics.

Public sector net borrowing, excluding state banks, fell by £7.6bn from December 2020 to £16.8bn, coming in below consensus expectations of £18.5bn, as tax receipts rose.

That marked the fourth-highest December borrowing figure since monthly records began in 1993.

Tax receipts were up £6.2bn on the year, while government spending fell £1bn to £86.7bn, and interest payments increased by £5.4bn on the year to £8.1bn in December.

“As it stands, cumulative borrowing in 2021-2022 is still on track to hit the OBR’s forecast of £183bn,” said Bethany Beckett, UK economist at Capital Economics.

“But we doubt that this will last - we expect retail price index inflation to average 2.8 percentage points higher than the OBR’s forecast in 2022-2023, which will push up total borrowing to £105bn, well above the OBR’s forecast of £83bn.

“Even so, on our forecasts, the Chancellor would have enough fiscal room to cancel the scheduled increase in National Insurance taxes on 1 April, if he decided to cushion the blow to households from the energy crisis.”

An industry survey, meanwhile, suggested that UK manufacturers were preparing to ramp up prices as they battled rising costs and labour shortages.

According to the latest industrial trends survey from the Confederation of British Industry, output volumes slowed in the three months to January, to 14% from 29% in December.

However, output increased in 10 out of the 17 sub-sectors, and a net balance of 23% of manufacturers expect output growth to pick up in the next quarter.

The proportion of manufacturers expecting domestic prices to rise over the next three months rose to 66%, the highest since 1977.

Firms reporting limited capacity due to a lack of skilled workers, meanwhile, was 42%, the highest since October 1973.

“Global supply chain challenges are continuing to impact UK firms, with our survey showing intense and escalating cost and price pressures,” said Rain Newton-Smith, chief economist at the CBI .

“Against the backdrop of rising energy prices, which are adding to inflationary pressures, short-term action is needed from the UK government to find urgent solutions for firms that are struggling.”

Across the pond, US consumer confidence deteriorated in January as short-term expectations weakened, according to a Conference Board survey.

The board’s consumer confidence index declined to 113.8 from 115.2 in December, but was above expectations for a reading of 111.8.

At the same time, the present situation index, which is based on consumers’ assessment of current business and labour market conditions, rose to 148.2 from 144.8.

The expectations index, based on the short-term outlook for income, business and labour market conditions, fell to 90.8 in January from 95.4 in December.

“Consumer confidence moderated in January, following gains in the final three months of 2021,” said Lynn Franco, senior director of economic indicators at the Conference Board.

“The present situation index improved, suggesting the economy entered the new year on solid footing.

“However, expectations about short-term growth prospects weakened, pointing to a likely moderation in growth during the first quarter of 2022.”

In equity markets, Royal Mail closed up 1.31% after saying it was axing 700 managers at a cost of £70m, and lowering its annual profit outlook.

Capricorn Energy leapt 6.59% after it said it was "very encouraged" by the initial operating performance of its newly-acquired Western Desert Assets in Egypt, with production growth ahead of expectations.

Online grocer and warehousing technology developer Ocado jumped 5.08%, closely followed on the top-flight index by educational publisher Pearson, which was ahead 3.34%.

Banks were also on the rise, with Standard Chartered up 4.98%, Lloyds Banking Group rising 3.33%, HSBC ahead 1.94%, NatWest Group 3.44% firmer, and Barclays 3.33% higher.

National and regional news publisher Reach, meanwhile, was the standout gainer on the FTSE 250 index, ending the session up 6.51%.

On the downside, Unilever slipped 0.19% after saying it was cutting 1,500 jobs in a management shakeup.

Property marketing portal Rightmove slid 2.55% by the end of trading, despite an initiation at ‘outperform’ at Davy.

Baltic Classifieds Group continued its slide, falling 0.84% on Tuesday after funds advised by Apax Partners LLP sold a 7% stake in the company on Friday, for around £78m.

Market Movers

FTSE 100 (UKX) 7,371.46 1.02%
FTSE 250 (MCX) 21,645.71 0.90%
techMARK (TASX) 4,351.98 0.45%

FTSE 100 - Risers

Ocado Group (OCDO) 1,430.00p 5.26%
Standard Chartered (STAN) 512.20p 4.98%
Abrdn (ABDN) 239.40p 4.45%
BP (BP.) 379.65p 4.27%
Shell 'B' (RDSB) 1,812.00p 3.67%
Shell 'A' (RDSA) 1,810.80p 3.64%
HSBC Holdings (HSBA) 509.40p 3.51%
NATWEST GROUP PLC ORD 100P (NWG) 237.80p 3.44%
Polymetal International (POLY) 1,170.00p 3.36%
Pearson (PSON) 619.00p 3.34%

FTSE 100 - Fallers

Auto Trader Group (AUTO) 635.40p -3.61%
Rightmove (RMV) 635.20p -2.55%
Evraz (EVR) 485.90p -2.13%
Aveva Group (AVV) 2,755.00p -2.13%
Barratt Developments (BDEV) 602.60p -1.92%
Coca-Cola HBC AG (CDI) (CCH) 2,450.00p -1.61%
Entain (ENT) 1,521.00p -1.55%
Taylor Wimpey (TW.) 144.90p -1.46%
Rentokil Initial (RTO) 513.80p -1.46%
Halma (HLMA) 2,409.00p -1.39%

FTSE 250 - Risers

Harbour Energy (HBR) 358.60p 8.67%
Capricorn Energy (CNE) 199.00p 6.59%
Reach (RCH) 253.50p 6.51%
Playtech (PTEC) 641.50p 6.03%
Herald Investment Trust (HRI) 2,035.00p 5.55%
Impax Environmental Markets (IEM) 437.00p 5.43%
Allianz Technology Trust (ATT) 268.00p 5.10%
Auction Technology Group (ATG) 1,110.00p 4.91%
Smithson Investment Trust (SSON) 1,632.00p 4.35%
Currys (CURY) 100.90p 4.18%

FTSE 250 - Fallers

Homeserve (HSV) 741.50p -4.51%
Syncona Limited NPV (SYNC) 175.40p -3.94%
Network International Holdings (NETW) 263.00p -3.73%
Darktrace (DARK) 352.40p -2.65%
Vistry Group (VTY) 978.80p -2.61%
Baltic Classifieds Group (BCG) 175.00p -2.51%
CLS Holdings (CLI) 218.50p -2.46%
Dr. Martens (DOCS) 306.00p -2.24%
JPMorgan European Discovery Trust (JEDT) 470.00p -2.08%
Ibstock (IBST) 191.40p -2.00%