Tuesday, 25 August 2015

FTSE snaps losing streak, extends recovery after China cuts rates

The FTSE 100 looked set for its biggest one-day rise since 2011 on Tuesday after China cut interest rates to try to calm markets following turbulence that has rocked equities globally.

The FTSE 100 .FTSE rebounded after dropping to its lowest level since 2012 in the previous session, having fallen for 10 straight days as concerns about China's economy mounted.

Following weak data on Friday, China's failure to deliver substantial stimulus over the weekend was cited as driving Monday's dramatic falls in global markets.

However, investors took heart after China's central bank cut interest rates and simultaneously relaxed reserve requirements for the second time in two months, cranking up support for a stuttering economy and its plunging stock market.

"The initial reaction in the equity market was aggressive as many expected that this news would be out at the weekend," Guardian Stockbrokers' director of trading, Atif Latif, said.

"It does however highlight that the economy in China continues to see downward pressures, but there are measures in place that will stem the flow."

The benchmark FTSE 100 rose 184.41 points, or 3.1 percent, to 6,083.28 points by 1113 GMT.

Shares in mining companies rebounded from China-related falls, having been under the cosh from commodity price weakness, with the FTSE 350 mining sector .FTNMX1770 up 5.7 percent from its lowest levels since 2009. Base metals rose modestly.

Glencore (GLEN.L) rallied 8 percent from all-time lows hit on Monday, while Antofagasta was up 7 percent, saying it was targeting savings of about $160 million this year.

BHP Billiton (BLT.L) also jumped about 6.8 percent despite reporting a 52-percent slump in annual profit to a decade low, as the world's biggest miner said it would cut spending more deeply to shore up dividends.

"Whilst the numbers were fairly ugly reading, I think the thing that the market was most concerned about was that the dividend should be maintained, which it was," Hargreaves Lansdown head of equities, Richard Hunter, said.

RSA (RSA.L) rose 4.4 percent after receiving a 550 pence all-cash takeover proposal from Zurich Insurance (ZURN.VX), paving the way for one of Europe's largest insurance deals.

reference: Reuters

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