Stocks in the U.K. surged Tuesday, rising along with other global markets, as slowing growth in China raised hopes for further stimulus for the world’s second-largest economy.
Meanwhile, the pound rose against the U.S. dollar after U.K. inflation come in higher than anticipated.
The FTSE 100 UKX, +1.92% blue-chip index rose 2.1% to 5,901.72. All sectors advanced, led by jumps in shares of mining companies. Commodities producer and trader Glencore PLC GLEN, +7.88% GLCNF, -5.35% and platinum and iron ore miner Anglo American PLC AAL, +6.53% each surged about 12%. Oil producer Royal Dutch Shell PLC RDSB, +3.07% RDS.B, -5.11% bulked up by 3.3%.
China, a major buyer of commodities, posted fourth-quarter growth of 6.8%, the slowest rate of expansion since 2009. Full-year 2015 gross domestic product growth of 6.9% was the weakest pace of expansion in 25 years. Worries among investors about slowing in China’s economy and the health of its financial system have contributed to a selloff in equity markets worldwide this year.
“In this setting we expect the government to take further measures to ensure that GDP growth does not deviate too much from the likely target of 6.5%,” said Louis Kuijs, head of Asia economics, at Oxford Economics, in a note. “On the monetary front, we expect another rate cut, and several cuts in [reserve ratio requirements]. However, with the room for credit-based stimulus starting to narrow, we expect more expansionary fiscal policy.”
Chinese shares turned higher following the GDP report, leaving the Shanghai Composite Index SHCOMP, +3.22% up 3.2%. In Hong Kong, the Hang Seng Index HSI, +2.07% gained 2.1%. In Europe, the Stoxx Europe 600 SXXP, +1.81% was up 2.2%.
Movers: Rio Tinto PLC RIO, +3.40% RIO, -6.27% RIO, +0.34% shares were lifted 4.9% after the iron-ore producer said annual global iron-ore shipments rose 11%, totaling 336.6 million metric tons. That was just shy of its earlier projection of 340 million tons.
British Land Co. PLC BLND, +1.47% gained 1.5% after the commercial property firm issued a strong third-quarter update.
Shares in FTSE 250-listed Ocado Group PLC OCDO, +7.18% rallied 11% on reports Amazon.com Inc. AMZN, -3.85% is interested in making a bid for the online grocer.
Sterling: The pound GBPUSD, -0.1404% rose to as high as $1.4344, compared with $1.4243 late Monday, after the Office for National Statistics said U.K. inflation rose to 0.2% year-on-year in December. That was higher than expectations of a 0.1% reading. Still, average inflation for the year was zero, the lowest rate since official estimates began in 1959.
The “disinflationary effects of lower oil prices, weak wages, and past rises in the pound should keep inflation rates below 1% until the autumn, in spite of recent offsetting falls in sterling,” said Investec economic Chris Hare in a note. That’s in part why the bank’s monetary policy committee, “in the words of committee member Jan Vlieghe last night, is likely to be ‘patient’, before raising rates. We therefore expect the MPC to keep bank rate on hold until November,” wrote Hare.
However, sterling pared some of its earlier gains after Bank of England Governor Mark Carney said “now is not yet the time to raise interest rates” in a speech at the Queen Mary University in London. The pound traded at $1.4270 after the speech.