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FTSE surges 2% as US considers lifting China tariffs

Broad-based rally sees all but a handful of blue-chip stocks making gains, as Wall Street Journal reports US could lift China tariffs

FTSE surges 2% as US considers lifting China tariffs

Update: The FTSE 100 has jumped 2% as a broad-based rally took hold on global markets after the Wall Street Journal reported the US was considering lifting tariffs on China.

The UK blue-chip index rose 133 points, or 2%, to 6,968, with only a handful of stocks failing to make gains.

Other European markets were also up strongly. The German DAX 30 was up 2.6% while the French CAC 40 rose 1.7%. In the US, the S&P 500 rose 1.2% while the Dow Jones was up 1.9%.

The Wall Street Journal reported that US treasury secretary Steven Mnuchin had proposed lifting some or all tariffs on China in a series of strategy meetings in a bid to advance trade talks and calm stock markets.

House builders, which have enjoyed a strong recovery from December lows since the turn of the year, were among the big FTSE 100 risers.

Barratt Developments (BDEV) was up 3.6% at 535p, Persimmon (PSN) rose 3.5% to £23.95 and Taylor Wimpey (TW) traded 3.2% higher at 167.2p.

Miners also rallied, buoyed by the prospect of a breakthrough in relations between the US and China, the world's top metals consumer.

Glencore (GLEN) rose 2.6% to 297.8p, Antofagasta (ANTO) added 3.8% to 854.8p and Anglo American (AAL) rallied 1.7% to £18.21.

The news also drove the oil price higher, with a barrel of Brent crude up 2.3% at $62.58. Shell (RDSb) was up 2.9% at £23.89 and BP (BP) rose 2.4% to 523.3p.

Airline groups EasyJet (EZJ) and British Airways owner International Airlines Group (ICAG) managed only modest gains, up 3p at £11.72 and 2.6p higher at 618.4p as rival Ryanair's (RYA.I) second profit warning in three months weighed.

A drop in winter fares – from a forecasted 2% to 7% – prompted the Ireland-listed budget carrier to cut full-year profit guidance by nearly 10%, though its shares clawed back losses to close marginally up.

‘That's a tough pill to swallow but there was a further sting in the tail as management warned it could not rule out further cuts to air fares or a reduction in guidance,’ said chief market analyst Neil Wilson. 

But there were some positives for Ryanair, he said, with traffic growth of 9%, ahead of forecasts. Ancillary sales and better unit costs should also add some comfort, he said. 

‘Today's lower guidance is a sign that a higher cost base makes it more problematic to maintain margins when overcapacity means lower fares,' Wilson added. 

The pound fell 0.4% to $1.294 after Office for National Statistics figure showed a 0.9% fall in December UK retail sales, a bigger drop than expected.

‘For many economists this will be a further reflection of the state of consumer confidence,’ said Helal Miah, investment research analyst at broker The Share Centre.

‘Although others will point out that December’s figures were poor because seasonal sales were pulled earlier into the November Black Friday sales.’

The biggest faller among mid-cap stocks was software company Sophos (SOPH) which slumped 17.6% to 310.2p after it flagged slightly lower annual billings.  

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