London close: Stocks rise on rate cuts, Ukraine optimism

(Sharecast News) - London stocks ended higher on Tuesday, as investor sentiment recovered from jitters over Moody's US credit rating downgrade, alongside increasing hopes of a ceasefire in Ukraine and renewed policy support from China.

The FTSE 100 index rose 0.94% to close at 8,781.12 points, while the FTSE 250 advanced 0.65% to 21,096.44 points.

In currency markets, sterling was last up 0.05% on the dollar to trade at $1.3368, while it slipped 0.03% against the euro, changing hands at �1.1881.

"Concerns that the equity rally might soon falter seem unfounded," said IG senior technical analyst Axel Rudolph.

"Global markets continue to climb, with Germany's DAX 40 reaching a new record high as German producer prices fall the most in six months and the UK's FTSE 100 reaching a near three-month high, driven by strong earnings reports from companies like Greggs and Vodafone.

"Asian markets are also on the up, reflecting improved investor sentiment following the People's Bank of China's and Reserve Bank of Australia's decisions to lower key lending rates."

Rudolph noted that it was only Wall Street stock indices that were "slightly treading water", with perhaps some investors heeding a warning from JPMorgan CEO Jamie Dimon.

"He cautioned that investors are underestimating the economic risks posed by rising tariffs, suggesting that markets are displaying an "extraordinary amount of complacency.

"Following a 15% drop in the natural gas price over the past couple of weeks amid warm weather, the imminent expiration of the May futures contract prompted traders to close out short positions on Tuesday, leading to an over 6% rise in the US natural gas price.

"Gold and silver prices also rose by over a percentage point as Israel is being threatened by Canada, France and the UK with sanctions in response to its ongoing military offensive in Gaza."

Interest rates falling too quickly, warns BoE chief economist

In economic news, the Bank of England's chief economist Huw Pill warned that interest rates may be falling too quickly in the face of persistent wage inflation.

Speaking at a Barclays event, Pill defended his decision to vote against the Bank's latest rate cut earlier this month, describing it as a temporary "skip" rather than a full halt to easing.

The Monetary Policy Committee reduced the base rate by 25 basis points in a split vote, marking the fourth cut of the current cycle.

Pill argued the pace of cuts was too aggressive given the risk that structural changes in wage-setting could entrench inflationary pressures.

Although consumer inflation has eased to 2.6%, close to the 2% target, wage growth remains elevated at around 5.6% excluding bonuses.

In China, the central bank reduced its key lending rates for the first time since October as authorities attempt to bolster the economy amid escalating trade tensions with the United States.

The People's Bank of China cut the one-year and five-year loan prime rates by 10 basis points each to 3.0% and 3.5% respectively, their lowest levels since 2019.

It followed weaker-than-expected retail sales data and continued declines in property prices.

In parallel, several major state-owned banks, including ICBC and the Bank of China, lowered deposit rates to further support liquidity.

"The PBoC has injected a dose of more stimulus into the economy, by cutting a key lending rate to a record low," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"It wasn't a surprise move - the aim is to try and revitalise the economy, by making borrowing cheaper to encourage investment and spending."

Australia's Reserve Bank also eased policy on Tuesday, trimming its benchmark interest rate by 25 basis points to 3.85%, the lowest level in two years.

Policymakers cited cooling domestic inflation and global uncertainty driven by US trade policies as key reasons for the cut, noting that risks to price stability have diminished.

RBA governor Michele Bullock said that since the bank's last board meeting, "global economic and policy uncertainty has increased substantially following tariff announcements by the US administration".

"The response of its trading partners and subsequent changes to the policies, including various bilateral agreements and deals - it's been a complete roller coaster.

"If the trade outcomes are much worse for the global economy, though, we could be facing a much larger downturn in Australia, with implications for inflation and unemployment."

Meanwhile, construction activity in the eurozone saw a marginal rebound in March, with output rising 0.1% month-on-month after a 1.2% drop in February, according to Eurostat.

However, year-on-year output fell by 1.1%, marking the sharpest decline in five months and the third consecutive annual contraction.

Diploma surges on positive day for London equities

On London's equity markets, Diploma surged 15.1% after the specialist distributor raised its full-year outlook for both organic revenue growth and operating margin, following a strong first-half performance.

Smiths Group also advanced, gaining 4.3%, after saying it now expects full-year revenue growth to come in at the top end of its guidance range due to sustained demand.

Retailer Marks & Spencer added 1.5% ahead of its full-year results due on Wednesday.

Vodafone rose 5.6% despite reporting a swing to a full-year operating loss, as investors welcomed its �2bn share buyback plan and guidance suggesting a return to growth in Germany.

On the FTSE 250, Greggs jumped 8.8% after the bakery chain reported a 2.9% rise in like-for-like sales for the first 20 weeks of the year and maintained its full-year guidance.

Cranswick gained 3.8% after posting record full-year revenue and profit, and announcing an independent review of its animal welfare policies.

SSP Group climbed 5.6% as the travel caterer reaffirmed its full-year guidance despite macroeconomic uncertainty.

Centrica rose 2.7% after Ithaca Energy agreed to buy a further stake in the Cygnus gas field from Centrica-backed Spirit Energy for �116m.

B&Q and Screwfix owner Kingfisher managed a modest gain of 0.1%, recovering from earlier losses despite a downgrade by Barclays.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,781.12 0.94%

FTSE 250 (MCX) 21,096.44 0.65%

techMARK (TASX) 4,777.49 1.08%

FTSE 100 - Risers

Diploma (DPLM) 4,860.00p 15.11%

Vodafone Group (VOD) 77.72p 7.26%

Smiths Group (SMIN) 2,144.00p 4.38%

Centrica (CNA) 156.90p 3.22%

Sainsbury (J) (SBRY) 289.20p 2.99%

Lloyds Banking Group (LLOY) 78.02p 2.87%

Glencore (GLEN) 270.95p 2.75%

Aviva (AV.) 607.40p 2.64%

SSE (SSE) 1,798.50p 2.60%

Imperial Brands (IMB) 2,819.00p 2.29%

FTSE 100 - Fallers

Entain (ENT) 758.80p -1.53%

Bunzl (BNZL) 2,490.00p -1.43%

Flutter Entertainment (DI) (FLTR) 18,445.00p -0.91%

Coca-Cola Europacific Partners (DI) (CCEP) 6,600.00p -0.60%

Antofagasta (ANTO) 1,790.00p -0.56%

Smurfit Westrock (DI) (SWR) 3,447.00p -0.43%

InterContinental Hotels Group (IHG) 8,938.00p -0.42%

Experian (EXPN) 3,925.00p -0.41%

Scottish Mortgage Inv Trust (SMT) 996.00p -0.40%

Prudential (PRU) 863.20p -0.37%

FTSE 250 - Risers

Greggs (GRG) 2,182.00p 9.15%

SSP Group (SSPG) 176.60p 5.62%

Future (FUTR) 667.00p 4.22%

Ocean Wilsons Holdings Ltd. (OCN) 1,375.00p 4.17%

Morgan Advanced Materials (MGAM) 220.00p 4.02%

Cranswick (CWK) 5,460.00p 3.80%

Burberry Group (BRBY) 1,048.00p 3.66%

CMC Markets (CMCX) 271.50p 3.23%

Ocado Group (OCDO) 280.00p 3.17%

Harworth Group (HWG) 179.50p 3.16%

FTSE 250 - Fallers

W.A.G Payment Solutions (WPS) 62.00p -4.91%

Ithaca Energy (ITH) 128.80p -3.45%

RHI Magnesita N.V. (DI) (RHIM) 3,035.00p -2.72%

Elementis (ELM) 128.80p -2.57%

JTC (JTC) 881.00p -2.54%

Genuit Group (GEN) 405.50p -2.29%

Wizz Air Holdings (WIZZ) 1,641.00p -1.74%

HICL Infrastructure (HICL) 115.00p -1.71%

Big Yellow Group (BYG) 999.00p -1.67%

3i Infrastructure (3IN) 325.50p -1.52%