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FTSE 100 hits two-year high as Johnson hints at ending all COVID restrictions

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FTSE 100
UK prime minister Boris Johnson. FTSE 100 was on the front foot on Wednesday following a rally on Walls Street and Asian markets. Photo: Justin Tallis / AFP via Getty Images

European stock markets were in the green on Wednesday morning following a rally on Wall Street and Asian markets.

The FTSE 100 (^FTSE) hit a two-year high as prime minister Boris Johnson hinted at scrapping the remaining COVID restrictions in the UK 89.06 points, or 1.2% to 7,656.

The mid-cap FTSE 250 (^FTMC) advanced 1.9% on Wednesday close. The index's gains was led by electronic components maker DiscoverIE (DSCV.L), which rose 3.2% on the back of an upbeat trading update, which saw it upgrade its full-year earnings forecast.

The pound also nudged higher against the dollar after the Bank of England's (BoE) chief economist Huw Pill backed a "steady handed approach" to raising rates.

The bank chief argued that with the situation as it is today, “a case can be made for a measured rather than activist approach to policy decisions.”

Sterling (GBPUSD=X) rose 0.3% to $1,358 against the dollar, and rose as much as 0.1% against the euro (GBPEUR=X).

Read more: Bank of England's chief economist urges caution over raising rates

Oil dragged markets on Tuesday after the US and Iran resumed talks over a nuclear deal which could see Iranian oil exports return to the international market.

"While a new oil deal may well get agreed the likelihood of a quick agreement remains highly unlikely, as well as the fact that we’ve been here before, so it would be unwise to raise too many hopes, said Michael Hewson, chief market analyst at CMC Markets.

On the geopolitical side, a positive meeting between the Kremlin and the West could see market jitters ease. French president Emmanuel Macron said his meeting with Russian president Vladimir Putin had gone well, and is moving towards "de-escalating" the Ukraine crisis, although this was later denied by Russia.

Brent futures (BZ=F) rose 0.8% to $91.48 (£67.51) per barrel, while Crude futures (CL=F) was up 0.4% at around 16:45PM in London.

Graph: Yahoo Finance
Graph: Yahoo Finance

Elsewhere in Europe, France’s CAC (^FCHI) was over 1.4% higher and the DAX (^GDAXI) increased over 1.7% in Germany.

It comes after senior officials at the European Central Bank (ECB) adopted a less hawkish tone in recent days.

Bank of France governor Francois de Villeroy pivoted and suggested that markets may have overreacted. "I think there were perhaps reactions that were very high and too high in recent days," de Villeroy said at the finance committee of France’s National Assembly.

Hewson said: "This perhaps shouldn’t be too surprising given that French CPI is at 3.8%, well below the likes of Germany, Netherlands, and Spain levels."

On Monday, ECB president Christine Lagarde said there were no signs that measurable monetary policy tightening would be required.

Read more: UK inflation to peak at 7% in April as households inequalities widen

Across the Atlantic, US major benchmarks closed in the green on Tuesday with a big boost from major tech and bank stocks – supported by the prospect of higher US interest rates.

The tech-heavy Nasdaq (^IXIC) soared 1.5%. The index edged higher thanks to shares in Amazon (AMZN) rising 2.2% while Apple (AAPL) added 1.9%.

Wall Street’s blue-chip S&P 500 (^GSPC) increased 37.67 points or over 0.8% to 4521.54, while the Dow Jones (^DJI) climbed 1.1%.

Following a positive January nonfarm payroll report last week, investors are keeping a close eye on Thursday’s consumer price inflation (CPI) data, to gauge if the upswing in prices in the last quarter of 2021 is showing signs of easing.

Experts anticipate CPI to be 7.3% in January compared to 7% in December. A higher than forecast number could see 10-year yields rise to 2%.

“This week’s focus continues to be on tomorrow’s US CPI numbers for January, with most of the market risk being priced towards a reading that could well come at the higher end of expectations,” Hewson added. “Consequently, this raises the possibility that a downside surprise could prompt a sharp counter reaction in the other direction.”

Overseas, the pan continental Stoxx Europe 600 (^STOXX) closed flat.

Asian stocks followed Wall Street’s lead, finishing higher across the board. The Shanghai Composite (000001.SS) gained 0.8%.

The Hang Seng (^HSI) rallied strongly surging over 2% while the Nikkei (^N225) added 1.1% in Japan.

Watch: What are SPACs?

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