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FTSE rallies as weak China sparks stimulus hopes

Disappointing growth figures spark speculation People's Bank of China could respond with further interest rate cuts, buoying markets.

 
FTSE rallies as weak China sparks stimulus hopes

The FTSE 100 has rallied after weak Chinese growth figures sparked hopes of further stimulus measures.

The UK blue-chip index rose 89 points, or 1.5%, to 5,869, after China reported gross domestic product growth of 6.8% in the fourth quarter, down from 6.9% in the third.

That prompted speculation China's central bank could respond with further interest rate cuts. 'There hasn't been a big deceleration in China over December but while inflation remains low, missed expectations raise the possibility of further rate cuts from the People's Bank of China,' said Jasper Lawler, market analyst at CMC Markets UK.

Augustin Eden at Accendo Markets was sceptical the rally would last. 'Chinese data disappointed, leading investors to convince themselves the people's government will play superhero - a role it's played with very limited success every other time Chinese data has disappointed with subsequent equity market strength short-lived at best,' he said.

Miners led the rally on hopes of further stimulus from China, the world's top metals consumer. Anglo American (AAL) jumped 8.1% to 252.2p, Glencore (GLEN) rose 7.7% to 81p, BHP Billiton (BLT) added 4.2% to 634.6p and Rio Tinto (RIO) rose 4.2% to £17.02.

House builders were also in the ascendancy on the prospect of persistently low interest rates keeping borrowing costs low. Bank of England monetary policy committee member Gertjan Vlieghe said yesterday in his first speech since joining the committee that policymakers must 'be prepared for the possibility that real interest rates will remain well below their historical average for a very long time'.

Taylor Wimpey (TW) rose 2.7% to 184.6p, Barratt Developments (BDEV) added 2.7% to 581.5p and Berkeley (BKGH) traded 1.3% higher at £34.76.

The latest inflation data from the Office for National Statistics meanwhile showed prices rose by 0.2% year-on-year in December, the highest level since January. That sent the pound 0.5% higher against the dollar at $1.431.

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