London midday: Stocks surge, Legal & General rallies after update
London stocks were sharply higher by midday on Tuesday amid hopes of a less hawkish policy stance from the US Federal Reserve and as investors welcomed news that chancellor Kwasi Kwarteng plans to bring forward the publication of his debt-reduction proposals.
The FTSE 100 was firmly above the psychologically-important 7,000 level, trading up 2.1% at 7,053.68, while the pound was off earlier highs but still 0.1% firmer versus the dollar 1.1339, having hit its highest level in two weeks.
Sentiment got a boost after weak US manufacturing data released on Monday sparked hopes the Federal Reserve may have to rein in its hawkish stance on interest rate hikes.
The mood was also lifted by reports that Kwarteng has yielded to pressure once again and will announce later in the day that the publication of the government’s medium-term fiscal plans will be brought forward to later this month, from 23 November.
The OBR will also bring forward its forecasts, to be published at the same time. The BBC said Conservative MP Mel Stride, chair of the Treasury Committee, had "pressed the chancellor very hard".
Neil Wilson, chief market analyst at Markets.com, said it was a "classic bear market relief rally", with yields and the dollar rolling over and equities rallying from oversold levels.
"The reason: chiefly some softer US data has people thinking the Fed might need to take a step back and pause hiking rates earlier than maybe thought. After a very sharp runup for bond yields last week as the UK’s gilt market broke, Monday saw a very abrupt correction.
"Rate cut bets in 2023 are on the rise again. But I think thoughts of pivots are a little premature. Indeed, the acceleration in services inflation in the EU and US is a worrying sign that they will need to do a lot more. Where we could get to is a situation where the central banks pivot prematurely for financial stability reasons (gilt markets, CS, whatever) whilst inflation is still running super-hot, further embedding inflation. We await to see what happens when the BoE ends its gilt market operation in the coming days."
In equity markets, UK insurer Legal & General gained after saying its investment arm had no exposure to recent turmoil in the liability-driven investment (LDI) market caused by Kwarteng's recent mini-budget. L&G also said it expects full-year operating profit growth to be up in line with the first half of 8% and annual capital generation of £1.8bn.
Phoenix Group, Prudential and Aviva also rose.
HSBC was also up following a report it is exploring a multibillion-pound sale of its operations in Canada in what would mark a significant retreat from its presence in North America. According to Sky News, HSBC's board has instructed investment bankers at JP Morgan to sound out prospective buyers of its business in the country.
High street bakery chain Greggs surged after it said total sales were up 14.6% over the 13 weeks ended 1 October, putting it on track to meet full-year expectations.
In broker note action, Hargreaves Lansdown jumped to the top of the FTSE 100 after an upgrade to ‘hold’ at Jefferies, while National Grid was higher after an upgrade to ‘neutral’ at Citi.
Pennon and Severn Trent both gained after upgrades to ‘outperform’ at RBC Capital Markets.
On the downside, Drax tumbled after BBC Panorama claimed in an investigation aired on Monday that the company was "cutting down trees in ancient forests important for fighting climate change".
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 924.00p 7.49%
Melrose Industries (MRO) 107.20p 6.03%
Intermediate Capital Group (ICP) 1,060.00p 6.02%
Legal & General Group (LGEN) 234.80p 5.81%
Whitbread (WTB) 2,450.00p 5.69%
Entain (ENT) 1,154.50p 5.68%
International Consolidated Airlines Group SA (CDI) (IAG) 98.86p 5.55%
Halma (HLMA) 2,165.00p 5.15%
Flutter Entertainment (CDI) (FLTR) 10,150.00p 4.70%
Prudential (PRU) 923.80p 4.69%
FTSE 100 - Fallers
Centrica (CNA) 71.52p -0.75%
SSE (SSE) 1,563.50p -0.60%
Dechra Pharmaceuticals (DPH) 2,624.00p -0.38%
Harbour Energy (HBR) 447.60p -0.33%
London Stock Exchange Group (LSEG) 7,618.00p -0.29%
Aveva Group (AVV) 3,175.00p -0.13%
Shell (SHEL) 2,312.00p 0.54%
GSK (GSK) 1,327.80p 0.62%
Land Securities Group (LAND) 535.00p 0.75%
AstraZeneca (AZN) 9,880.00p 0.75%
FTSE 250 - Risers
Just Group (JUST) 63.95p 9.88%
Greggs (GRG) 1,887.00p 9.52%
Currys (CURY) 63.10p 8.79%
Wetherspoon (J.D.) (JDW) 423.60p 8.67%
ICG Enterprise Trust (ICGT) 1,072.00p 8.39%
Dunelm Group (DNLM) 806.50p 7.68%
Liontrust Asset Management (LIO) 800.00p 7.38%
Urban Logistics Reit (SHED) 138.50p 7.36%
Elementis (ELM) 98.75p 7.10%
Moonpig Group (MOON) 168.70p 6.91%
FTSE 250 - Fallers
Drax Group (DRX) 564.00p -6.39%
Home Reit (HOME) 89.00p -1.00%
Vietnam Enterprise Investments (DI) (VEIL) 605.00p -0.82%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 461.00p -0.65%
NB Private Equity Partners Ltd. (NBPE) 1,560.00p -0.64%
Hikma Pharmaceuticals (HIK) 1,350.50p -0.52%
Carnival (CCL) 536.40p -0.41%
ContourGlobal (GLO) 252.00p -0.40%
W.A.G Payment Solutions (WPS) 88.00p -0.11%
Centamin (DI) (CEY) 91.08p -0.09%