British Equities Hit One-week High As China Pledges Boost Sentiment
British equities reached a one-week high on Wednesday as China’s central bank announced measures to support its economy, lifting sentiment among investors. The exporter-heavy FTSE 100 rose by 0.6%, while the domestically oriented FTSE 250 index increased by 0.9%.
China’s decision to reduce the amount of cash that banks must hold as reserves by 50 basis points from February 5th bolstered industrial metal miners, who experienced a 2.6% surge. Antofagasta, Glencore, and Anglo American, three major players in the mining industry, saw their shares climb between 3% and 5.3%, driving gains on the FTSE 100.
Commenting on the situation, Michael Hewson, chief market analyst at CMC Markets UK, stated, Today has seen prices edge higher on hopes that the new measures announced by China will provide an uplift on the demand side, although the fact that they are due to arrive just before Chinese New Year could mean that the pickup in demand might be delayed several weeks.
Asia-exposed insurer Prudential experienced a 2.2% increase in its share price, while luxury retailer Burberry saw a rise of 3.7%. These gains lifted the personal goods index by 2.5% as hopes of a demand refresh from China grew.
Precious metal miners also saw a significant surge of 4.7% due to positive news surrounding each of their constituent companies. Endeavour Mining witnessed a 4.4% jump, and Centamin gained 5.2% after Liberum upgraded their shares to buy, citing gold equities as likely to shine this year amid global war and trade tensions, particularly if Donald Trump wins the U.S. presidential race in November.
In addition, gold miners Fresnillo Plc rose by 4.2% and Hochschild Mining increased by 7.5% following strong production numbers.
Meanwhile, the pound rallied following a survey that indicated a stronger start for Britain’s economy in 2024. This prompted investors to reduce their bets on the Bank of England taking swift action to cut interest rates.
On an individual stock level, pest control company Rentokil was the top decliner on the FTSE 100, experiencing a 2.3% decrease following a downgrade from BofA Global Research.
Conversely, Tullow Oil stood out as one of the top gainers on the FTSE 250 with a 10.7% rise on the back of promising cash flow forecasts for the next two years.
As British equities reached a one-week high due to China’s commitment to prop up its economy, traders and investors cautiously hoped for a boost in demand. This sentiment was tempered by the potential delay caused by the Chinese New Year festivities and reflected positive performance in sectors such as metal mining and luxury goods. The positive outlook for gold mining equities further added to investors’ optimism. However, the market remains cautious, keeping an eye on global events, including the U.S. presidential race and ongoing trade tensions.
