London stocks jump as Fed bond-buying boosts recovery hopes

UK shares jumped on Tuesday after the US Federal Reserve's move to expand its purchase of corporate bonds to contain the fallout from the COVID-19 pandemic eased liquidity concerns and boosted hopes of a global economic recovery.

The Fed said it would start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility (SMCCF) to beef up liquidity in the market.

UK investors are now expecting the Bank of England to raise its asset purchase target by 100 billion pounds ($127 billion) on Thursday, as bond-buying becomes the central bank's main weapon for tackling what could be the UK's deepest recession in three centuries.

"Central banks everywhere are doing what they can to manage economic catastrophe through liquidity infusion and whenever this happens it gives confidence to the markets that everything will be okay, leading to an immediate boost," said Keith Temperton, a trader at Tavira Securities.

British blue-chip stocks rose 2.5pc, with cyclical stocks including life insurers, banks and industrials among top advancers.

Markets were spooked by fears of a second coronavirus wave at the beginning of the week as cases in Beijing and the United States spiked, which dampened hopes of a recovery from the coronavirus-led economic slump.

The mid-cap FTSE 250 index rose 2.7pc, with cinema operator Cineworld Group Plc surging 6.2pc as it said some of its theatres would reopen in the last week of June and the rest in July.

Greggs rose 4.8pc after the baker confirmed plans to reopen 800 shops for takeaway only on June 18.

De La Rue surged 9.2pc as the banknote printer said Britain's Serious Fraud Office had closed an investigation into "suspected corruption" in the company's South Sudan business.

Investors also shrugged off data that showed a 612,000 fall in payrolls numbers in April and May and vacancies plunging by the most on record.