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U.K. stocks advanced on Tuesday, as investors cheered the European Union’s €750 billion coronavirus recovery plan and positive vaccine developments.
The FTSE 100 UKX, +0.41% was 0.4% higher in early afternoon trading, while the more domestically-exposed FTSE 250 MCX, +0.72% rose 0.7%.
After four days of negotiations, which rattled investors’ nerves, the EU’s 27 leaders agreed a spending package designed to aid the economic recovery, sending stocks across the continent higher.
The negotiations had reportedly stalled due to a split between the so-called frugal EU countries — Sweden, Denmark, the Netherlands and Austria — and those worst affected by the pandemic, such as Italy and Spain.
The agreed deal will see €390 billion offered in grants to individual countries, with the rest coming in the form of loans, lower than the proposed €500 billion in grants. The leaders also agreed on a multiyear budget of around €1.1 trillion from 2021-2027.
A raft of encouraging vaccine developments, most notably trial results from the University of Oxford and AstraZeneca’s AZN, -1.63% AZN, +0.39% effort, added to the optimism. However, the British drugmaker’s stock fell despite the encouraging signs, as HSBC said the study showed “far from ideal” side effects, which analyst Julie Mead said would lead to the vaccine being reassessed in more normal times.
AJ Bell investment director Russ Mould said the FTSE 100’s rise was driven by financial stocks. “HSBC HSBA, +2.23%, Prudential PRU, +1.39%, Barclays BARC, +0.79% and Lloyds LLOY, were in demand as investors flocked to more cyclical areas of the market. More defensive stocks were out of fashion including declines in the utilities space,” he said.
The U.K.’s debt-to-gross-domestic-product ratio has hit its highest level since 1961, according to data released on Tuesday. But investors looked beyond concerning economic data, as the pound rallied to six-week highs of $1.271 amid wider market optimism.
Stocks in focus
Ladbrokes owner GVC Holdings GVC, -13.09% tumbled 13.4% after the betting and gambling group said it was being investigated by the U.K. tax authority over “potential corporate offending” in relation to its former Turkish-facing online gambling business.
BHP BHP, -2.92% stock fell 3.5%, despite the mining giant achieving record iron ore output, as petroleum production was hit in the fourth quarter by falling gas demand due to the pandemic. The company warned demand for commodities was threatened by another coronavirus spike and widened its production guidance range for next year.
British supermarkets grew sales by a record 16.9% between mid-April and mid-July, market research company Kantar said on Tuesday. Tesco TSCO, +1.72% stock rose 1.6% and WM Morrison MRW, +1.31% climbed 1.3%, while Sainsbury’s SBRY, -0.73% slipped 0.6%.
