By Devik Jain
(Reuters) – London’s FTSE 100 index rose for a third day on Wednesday, as miners and other export-heavy firms were boosted by a dip in sterling, with investors weighing the impact of a cut in U.S. interest rates on a slowing global economy.
The blue-chip index (FTSE) rose 0.9%, led by gains for Rio Tinto (L:RIO), Antofagasta (L:ANTO) and Anglo American (L:AAL). The domestically focussed mid-cap index (FTMC) was slightly higher.
The mining index (FTNMX1770)rose 3%, while the oil and gas sector (FTNMX0530) was up 0.9%.
Those sectors, along with luxury goods makers (FTNMX3760) , have recovered after being hit hard last month by fears of widespread disruption to supply chains as the virus spread rapidly outside China.
Chinese factory and services activity contracted sharply in February, and central banks around the world are scrambling to come up with ways to contain the hit to growth.
In its first such move since the global financial crisis in 2008, the U.S. Federal Reserve unexpectedly lowered borrowing costs by 50 basis points on Tuesday, setting the stage for its European peers to follow suit.
Many on Wall Street, however, read that as a sign of panic and worse things to come, sending U.S. markets tumbling.
“We do expect more central bank easing; we expect it in the UK and Europe as well as a further rate cut in the U.S.,” said Simona Gambarini, markets economist at Capital Economics in London.
“Having said that, the stock market only recovers (from epidemics) when the pace of new cases peaks, which might be some time away for some countries. So despite the monetary easing, we might not see a recovery in the stock market until then.”
London’s benchmark FTSE 100 is still in correction territory, implying a fall of 10% from a recent peak.
Gains on the index on Wednesday were capped by airline stocks including British Airways-owner IAG (L:ICAG), as the virus continued to spread in over 80 countries.
The wider travel and leisure sub-sector (FTNMX5750) has now fallen in eight of the past nine sessions.
Among individual stocks, mall operator Intu (L: INTUP) slumped 30.1% to a record low as it scrapped a planned equity raise and said there was a risk that it might breach some of its debt covenants this year.
Sausage-skin maker Devro (L:DVO) gained 3% after saying its China manufacturing plant was operating at normal capacity and had not faced labour or supply shortages due to the health crisis.