LONDON MARKETS: FTSE 100 Leaps 1%, As Commodity Shares Lift Index Off 6-week Low

By Carla Mozee, MarketWatch

Ocado, tobacco stocks rise after analyst comments

U.K. stocks jumped Tuesday, with gains for oil shares helping London's blue-chip index bounce off a six-week low that it reached as trade tensions between the U.S. and China escalated.

How markets are moving

The FTSE 100 index surged 1.2% to 7,697.86. All sectors rose, led by the basic materials sector, which contains mining stocks.

Losses in mining shares, which came on concerns that a U.S.-China trade war will cut demand for metals, contributed to Tuesday's drop of 0.4% for the FTSE 100 (http://www.marketwatch.com/story/ftse-100-drops-as-us-china-trade-fight-intensifies-2018-06-19). Tuesday's finish also marked the index's lowest close since May 8, according to FactSet data.

The British pound traded at $1.3157, down from $1.3173 late Tuesday in New York.

What's driving markets

Like Asian and continental European equity markets (http://www.marketwatch.com/story/european-stocks-stage-recovery-but-us-china-trade-tensions-remain-2018-06-20), U.K. stocks were recovering from Tuesday's slide, which came as investors fled on worries about the deteriorating U.S.-China trade relationship. On Wednesday, the Shenzhen index added 1.2%, after Tuesday's 5.8% slide, while Hong Kong's Hang Seng Index gained 0.9%.

In Washington, the White House accused China of waging a systematic campaign of "economic aggression" in a report released Tuesday (http://www.marketwatch.com/story/navarro-report-blasts-china-for-systematic-economic-aggression-2018-06-19). That followed U.S. President Donald Trump's threat to impose more tariffs on Chinese goods, adding up to levies on $450 billion in imports, after Beijing threatened to retaliate against a first round of U.S. tariffs (http://www.marketwatch.com/story/china-threatens-further-tariffs-on-us-products-as-trade-conflict-escalates-2018-06-19).

But the trade-war concerns seemed to be subsiding somewhat after the governor of the People's Bank of China, Yi Gang, reportedly appealed (http://www.scmp.com/business/markets/article/2151558/hong-kong-stocks-steady-early-trading-even-dow-wipes-out-gains-made) for investors "not to lose confidence" in China's "strong economic fundamentals." Fears that Beijing would use yuan devaluation as a weapon in the trade hostilities eased, too, after the Chinese central bank set its reference rate for the currency (http://www.marketwatch.com/story/yuan-move-by-chinas-central-bank-shows-no-effort-to-devalue-amid-trade-spat-2018-06-20) at its lowest since January.

Read:China can't match Trump in a tariff fight, but it does have other weapons (http://www.marketwatch.com/story/china-cant-match-trump-in-a-tariff-fight-but-it-does-have-other-weapons-2018-06-19)

Meanwhile, investors are watching developments from the Organization of the Petroleum Exporting Countries, whose members are gathering in Vienna (http://www.marketwatch.com/story/what-time-is-the-opec-meeting-2018-06-19). While meetings are set for Friday and Saturday, OPEC Secretary General Mohammad Barkindo on Wednesday delivered his opening speech for the group's International Seminar, and oil ministers have started making comments on the sidelines. Oil prices were up nearly 1%, above $65 a barrel, and Brent crude futures picked up 0.6%.

See:What time is the OPEC meeting? (http://www.marketwatch.com/story/what-time-is-the-opec-meeting-2018-06-19)

And read:Why Goldman Sachs still sees oil peaking above $82 a barrel this summer (http://www.marketwatch.com/story/why-goldman-sachs-still-sees-oil-peaking-above-82-a-barrel-this-summer-2018-06-18)

Also, lawmakers in the House of Commons are expected to continue their debate of the bill that will take the U.K. out of the European Union. On Monday, the U.K. House of Lords voted to give Commons members a "meaningful vote" on the final Brexit deal, a result that's considered a defeat for the U.K. government led by Prime Minister Theresa May.

What strategists are saying

"Given the absence of any major news on the trade front, the trigger for the shift in sentiment appears to have been some market-friendly signals from the People's Bank of China. The central bank said it is prepared for outside shocks and that China has room to face all sorts of trade frictions, fueling speculation for a loosening of policy should the trade outlook deteriorate," said Marios Hadjikyriacos, investment analyst at XM.com.

"Ironically, any further easing from the PBOC could lead to a weaker yuan, thereby potentially exacerbating the U.S.-China trade deficit that the U.S. administration is so desperately trying to reduce," he said in a note.

"Last week's discussion [in the House of Commons] descended into chaos with Scottish MPs walking out in protest and almost 100 Labour MPs going directly against [Labour leader] Jeremy Corbyn. This kind of discord at the top is continuing to leave business without clarity on any of the key aspects in their dealings with Europe and will continue to affect both U.K. company shares and the pound," said Fiona Cincotta, senior market analyst at City Index, in a note.

Stock movers

Shares of oil producers BP PLC (BP.LN) (BP.LN) and Royal Dutch Shell PLC (RDSA.LN) (RDSA.LN) gained 0.7% and 1.1%, respectively, as OPEC leaders gather in Vienna. Among mining stocks, copper producer Fresnillo PLC (FRES.LN) leapt 3.4% and Glencore PLC (GLEN.LN) surged 3.2%.

Ocado PLC shares (OCDO.LN) climbed 5.1%. Peel Hunt analysts said in a note that they believe the online grocery and technology company "has potential to become the 'standard' platform for retail logistics across all sectors as the operating system of retail."

Berkeley Group Holdings PLC (BKG.LN) stumbled 4.1% after the home builder said it expects profit to be around 30% lower in fiscal 2019 (http://www.marketwatch.com/story/berkeley-group-foresees-lower-profit-2018-06-20) and that pretax profit in fiscal 2018 represented a peak. Shares of other home builders lost ground, with Barratt Developments PLC (BDEV.LN) down 1.1%, Persimmon PLC (PSN.LN) shed 0.5% and Taylor Wimpey PLC (TW.LN) slipped 0.1%.

Imperial Brands PLC (IMBBY) jumped 2.9%, and British American Tobacco PLC (BATS.LN) gained 2.5%, as Liberum started coverage on the tobacco producers with buy ratings.

(END) Dow Jones Newswires

June 20, 2018 05:55 ET (09:55 GMT)

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