London close: UK stocks at best levels this year as Tesco jumps 15%

London's FTSE 100 surged by 2.3% on Thursday to close at its best level this year as a massive gain in the share price of heavyweight supermarket group Tesco gave fellow retailers a lift.

Increased hopes for central-bank stimulus in Europe, a stabilisation of oil prices and improving economic data from the States also boosted sentiment across financial markets worldwide.

The Footsie finished the day up 150 points at 6,569.96, its best close since 29 December 2014 when it settled at 6,633.50.

"US confidence has coerced a solid triple-digit climb from the FTSE and the majority of European equity indices, as the bulls have taken control of traders risk appetite," said analyst Alastair McCaig from IG.

Wall Street markets got off to a good start on Thursday after data showed that US initial jobless claims fell from 298,000 to 294,000 last week, more or less in line with forecasts. Barclays economists said the figures "reflect continued labour-market improvement, which we expect will continue through the year".

Both economic confidence and producer-price figures in the Eurozone came in below forecasts on Thursday morning, and followed the news on Wednesday that the region experienced consumer-price deflation in December.

While the figures add to concerns that the recovery in the single-currency region is faltering, the data puts further pressure on the European Central Bank to fire off on full-blown quantitative easing when it meets later this month.

Meanwhile, the announcement by the Bank of England at noon that interest rates were left unchanged didn't have a major impact on the market, with most economists not expecting a rate rise until the latter part of the year at the earliest.

Brent crude was up 0.1% at $51.22 a barrel by the close in London as the recent slide in prices abated following the news that US stockpiles unexpectedly shrank last week.

Tesco impresses with turnaround, Christmas sales

Tesco’s shares surged finished the day 15% higher after the company said it would cut costs substantially next year, close 43 unprofitable stores and lower prices, as chief executive Dave Lewis attempts to turn around the struggling business. The news came as Tesco unveiled a “broad-based improvement” in UK trading with the like-for-like (LFL) sales decline easing to just 0.3% over Christmas.

Rival chains such as J Sainsbury, Wm Morrison and online counterpart Ocado also surged.

In contrast, department-store retailer Marks & Spencer fell sharply after sales of general merchandise and womenswear over the Christmas period were significantly worse than had been expected, falling 5.8% on a LFL basis.

Also lower were airline peers Easyjet and IAG as oil prices steadied. Airline stocks have risen sharply recently on hopes that the collapse in crude will lead to lower fuel costs.

Halfords took a tumble after the boss of the car- and bike-parts retailer Matt Davies left for Tesco. Investec labelled the departure as "disappointing" given that Davies was the "architect of [Halfords'] recovery strategy".

Mining stocks were mostly higher on Thursday, but Egyptian gold producer Centamin bucked the trend after disappointing the market with its guidance for production in 2015.

Market Movers
techMARK 2,996.90 +2.02%
FTSE 100 6,569.96 +2.34%
FTSE 250 16,085.54 +1.48%

FTSE 100 - Risers
Tesco (TSCO) 209.25p +14.97%
Sainsbury (J) (SBRY) 252.40p +9.93%
Morrison (Wm) Supermarkets (MRW) 184.70p +7.76%
Intertek Group (ITRK) 2,430.00p +5.24%
Vodafone Group (VOD) 225.75p +4.51%
Aviva (AV.) 483.20p +4.30%
Imperial Tobacco Group (IMT) 2,950.00p +4.24%
SABMiller (SAB) 3,362.50p +4.02%
Friends Life Group Limited (FLG) 365.10p +4.02%
CRH (CRH) 1,552.00p +3.74%

FTSE 100 - Fallers
Marks & Spencer Group (MKS) 446.90p -3.52%
easyJet (EZJ) 1,616.00p -1.70%
International Consolidated Airlines Group SA (CDI) (IAG) 473.70p -1.56%
Tullow Oil (TLW) 393.90p -0.48%
TUI AG Reg Shs (Post- 16/12/14)(DI) (TUIJ) 1,078.00p -0.28%
Persimmon (PSN) 1,539.00p -0.13%
BG Group (BG.) 842.50p -0.08%
British Land Co (BLND) 778.50p -0.06%

FTSE 250 - Risers
NMC Health (NMC) 503.00p +6.68%
Ocado Group (OCDO) 415.00p +6.33%
Ted Baker (TED) 2,384.00p +5.49%
Mitchells & Butlers (MAB) 418.60p +5.18%
Ashmore Group (ASHM) 274.70p +5.09%
Nostrum Oil & Gas (NOG) 450.00p +4.97%
Howden Joinery Group (HWDN) 411.20p +4.84%
Laird (LRD) 331.70p +4.31%
Kier Group (KIE) 1,475.00p +4.31%
Elementis (ELM) 267.70p +4.20%

FTSE 250 - Fallers
Halfords Group (HFD) 423.30p -8.48%
AO World (AO.) 254.30p -6.23%
Zoopla Property Group (WI) (ZPLA) 181.50p -5.81%
Dairy Crest Group (DCG) 470.00p -3.49%
Centamin (DI) (CEY) 62.75p -3.16%
Rathbone Brothers (RAT) 2,001.00p -2.63%
Jimmy Choo (CHOO) 170.70p -2.46%
Allied Minds (ALM) 368.70p -2.28%
Paragon Group Of Companies (PAG) 410.90p -2.10%
Oxford Instruments (OXIG) 1,107.00p -2.04%