Following further falls into bear territory on Tuesday morning, UK-listed blue chips bounced back and managed to end the trading day higher.
Having collapsed 20% over the past month and passed the 5,000-point mark on its way down, the FTSE 100 index closed the day 1.9% or 96 points higher at 5,164. The FTSE 250 index also gained, up 2.3% or 229 points to 10,091.
Bargain hunting and regained confidence in the ability of the European Central Bank to cool Europe’s sovereign debt fever were cited as propellants of investor appetite today. Yields on Spanish and Italian sovereign debt stepped down from recent highs to 5.1% and 5.2%, respectively.
The economic news of the day can hardly take credit for the turnaround in market sentiment, however. Chinese retail sales and industrial production for July both disappointed, and Chinese consumer prices increased more than anticipated over the past month.
U.K. economic announcements were similarly disheartening. Manufacturing output unexpectedly contracted in June, while the U.K. trade deficit widened to a year-to-date high of £4.5 billion in June from £4.1 billon in May. Both these indicators add to growth concerns, said Howard Archer, Chief UK and European Economist with IHS Global Insight.
“Although manufacturing output only accounts for 12.8% of GDP, it was the economy’s best performing sector in 2010 and early-2011 so its recent marked falling away is of significant concern,” he pointed out.
Across the pond, the stock market opened higher ahead of the August Federal Reserve interest rate decision, due at 19:15 BST, with investors on alert for any signs of what the central bank might do to support U.S. growth.
Among individual movers on the London Stock Exchange, InterContinental Hotels Group (IHG) gained 8.2%, boosted by strong first-half results, an upbeat outlook and positive reaction from brokers.
Commodity companies bounced back, with Cairn Energy (CNE), Xstrata (XTA) and Essar Energy (ESSR) up 6.9%-8.2% alongside an increase in metal and energy prices.
Weir Group (WEIR), the biggest faller in Monday’s trade, gained 7.8%, while ARM Holdings (ARM) jumped 7.5% from recent lows.
On the flipside, heavyweight financials remained in the red. Lloyds Banking Group (LLOY) and Royal Bank of Scotland (RBS) slipped 2.1% and 3.9%, respectively.
Popular during the recent market downturn, precious metal miner Fresnillo (FRES) fell 7.3%.
Meanwhile, International Power (IPR) lost 2.0% after reporting a wider first-half net loss and peer Scottish & Southern Energy (SSE) dipped 2.8%.