London close: Stocks rise on China rate cut, Biden withdrawal

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easyJet

571.60p

16:35 20/12/24

-0.31%

-1.80p

London's stock markets ended Monday on a positive note, buoyed by a surprise interest-rate cut from China and significant political news from the United States.

International Consolidated Airlines Group SA (CDI)

305.80p

16:40 20/12/24

1.26%

3.80p

Travel & Leisure

9,231.47

17:14 20/12/24

0.69%

63.21

The FTSE 100 rose 0.53%, closing at 8,198.78 points, while the FTSE 250 gained 0.34% to finish at 21,138.68 points.

In currency markets, sterling was last down 0.05% on the dollar, trading at $1.2908, while it edged down 0.03% against the euro, last changing hands at €1.1865.

“Investors have had a weekend to digest the moves in markets last week, when a rotation to small caps finally seemed to be upon us,” said IG chief market analyst Chris Beauchamp.

“At present there seems to be little impact from Biden’s decision to withdraw from the 2024 election, with investors likely waiting for the first real Harris v Trump polls to emerge.

“Until then, it seems a ‘business as normal’ mentality prevails, given that Trump is still riding high after the attempt on his life and the Republican convention.”

Beauchamp added that the wheels had already come off the rally in budget airlines, but Monday’s Ryanair news poured fuel on the fire.

“A race to the bottom on prices seems underway, a scenario very different to the optimistic assumptions that had done the rounds earlier in the year.

“Investors will have to hope that winter bookings provide some salvation for battered share prices.”

China unexpectedly cuts interest rates

Economic news was thin on the ground on Monday, although the People's Bank of China was in focus after it lowered its short-term policy rate for the first time since mid-2023, reducing the seven-day reverse repurchase rate by 10 basis points to 1.70%.

The decision also saw cuts to the one and five-year loan prime rates.

Its moves follows last week's Third Plenum of the Communist Party, where concerns about the economy were raised and a commitment to provide support was made.

Economists at Capital Economics were not impressed by the latest rate cuts, pointing out to clients that limited credit growth was the result of weak demand and not of restrictions on loan supply.

“While today's rate cuts offer some reassurance that policymakers are being responsive to the recent loss of economic momentum, the heavy lifting will need to come from fiscal, not monetary, policy,” said Julian Evans-Pritchard, head of China economics at Capital.

“Fortunately, the signs on that front are encouraging too.”

In the United States, president Joe Biden announced his withdrawal from the presidential race late on Sunday, endorsing vice president Kamala Harris for the Democratic Party's nomination.

The decision came after Biden's performance in the last debate and a recent assassination attempt on Donald Trump, prompting calls for Biden to step aside in favour of Harris.

Airlines slide, Rentokil in the green on acquisition rumours

On London’s equity markets, the travel and leisure sector was in focus as easyJet and IAG experienced heavy losses, down 7.12% and 3.41% respectively.

The declines followed Friday’s IT outages caused by US cybersecurity giant CrowdStrike, which led to thousands of flight cancellations.

CrowdStrike warned that a full recovery of its systems could take weeks, exacerbating the sector's woes.

Ryanair faced an even steeper drop, with shares plummeting 13.56%.

That came after the airline reported a sharp decline in quarterly profits and issued a warning that fares would likely be "materially" lower than last summer, further dampening investor sentiment.

On the upside, Rentokil Initial surged 7.77% amid merger and acquisition speculation.

Rumours that former BT boss Philip Jansen might be interested in the company boosted investor confidence in the pest-control firm.

Entain saw a 1.83% rise after announcing the appointment of Gavin Isaacs as its new CEO, effective 2 September.

The FTSE 100 gambling giant highlighted Isaacs' extensive experience in the sports betting, gaming, and lottery industries, which contributed to the stock's performance.

Ocado Group jumped 12.17% following an order from US grocery giant Kroger for two of its newest technology solutions.

Hammerson climbed 3.31% after announcing it had sold its interest in Value Retail to L Catterton for an enterprise value of £1.5bn.

The shopping centre owner also revealed a £140m share buyback and a one-for-10 share consolidation, further boosting its stock.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,198.78 0.53%
FTSE 250 (MCX) 21,138.68 0.34%
techMARK (TASX) 4,780.68 0.32%

FTSE 100 - Risers

Rentokil Initial (RTO) 482.90p 7.77%
Burberry Group (BRBY) 719.80p 3.18%
CRH (CDI) (CRH) 6,268.00p 2.42%
Intermediate Capital Group (ICG) 2,138.00p 2.30%
Admiral Group (ADM) 2,624.00p 2.26%
Entain (ENT) 658.00p 2.14%
Spirax Group (SPX) 8,630.00p 2.13%
Experian (EXPN) 3,566.00p 1.97%
Aviva (AV.) 490.20p 1.81%
SEGRO (SGRO) 922.40p 1.56%