Miners have surged, buoyed by a sharp fall in the dollar, after the US Federal Reserve raised interest rates as expected but signalled only two more hikes for the year.
Mining stocks raced to the top of the FTSE 100, which jumped 69 points, or 0.9%, to a new all-time high of 7,438, and were on course for their biggest-one day rise since the election of Donald Trump as US president in November.
Anglo American (AAL) was the biggest riser on the index, up 9.6% at £13.09, also buoyed by news Indian billionaire Anil Agarwal is to buy a £2 billion stake in the company.
Fellow mining stocks dominated the FTSE 100 leaderboard. Risers included:
- Fresnillo (FRES) +6.9% at £15.53;
- Antofagasta (ANTO) + 6.5% at 858.2p;
- BHP Billiton (BLT) +6% at £13.62;
- Rio Tinto (RIO) +5.8% at £35.40;
- Randgold Resources (RRS) +5.5% at £73.40;
- Glencore (GLEN) +5.3% at 342.2p.
It was the same story on the FTSE 250, which hit a new all-time high of 19.028, with miners and metal stocks at the top of the index. Risers included:
- Kaz Minerals (KAZ) +9.5% at 527p;
- Hochschild Mining (HOCM) +8.7% at 291.6p;
- Vedanta Resources (VED) +7% at 892.5p;
- Evraz (EVRE) +5.2% at 215.5p;
- Polymetal International (POLYP) +5.3% at £10.01;
- Ferrexpo (FXPO) +5% at 166.4p.
They were supported by the dollar's sharp fall following the Fed's announcement yesterday evening. A weak dollar tends to boost commodities as they are priced in the currency.
'Dovish' Fed hike
The US central bank raised rates to a range of 0.75% to 1%, up from its previous range of 0.5% to 0.75%, but stuck to its guidance of two more hikes this year. Investors had been anticipating a further three.
The pound, which was trading at $1.22 prior to the announcement, jumped to $1.23 on the news, although it has this morning fallen back to $1.227.
'It's a dovish hike by the Fed, which delivered the expected increase in Fed funds by 25 basis points, but with no change to the macro forecast,' said Andrea Iannelli, investment director at Fidelity International.
'This will come as a disappointment for anyone who was expecting them to signal three further hikes this year. With no big change, and a gentle path ahead for Fed funds, the short term outlook remains bullish for risky assets. The dollar, on the other hand, is likely to lose some steam.'
Dutch poll relief
The euro made even bigger gains against the greenback, also buoyed by the victory of the People's Party for Freedom and Democracy, ahead of right-wing populist Geert Wilder's Part for Freedom.
The euro was trading at $1.062 before the Fed's announcement, before jumping to $1.074 overnight as polls pointed to Wilder's defeat, and is now trading at $1.072.
With the Dutch election acting as a prelude to polls in France and Germany later this year, Ian Ormiston, manager of the Old Mutual European (ex-UK) Smaller Companies fund, cautioned against investors drawing too many conclusion's from last night's result.
'While far-right candidate Geert Wilders had made much of the running over the last 12 months, due to the Netherlands' proportional representation system, his chances had been overstated outside his home country,' he said.
'Even at the peak of its popularity (which has since waned, the PVV attracted less than a quarter of the electorate, far below the levels of support that Marine Le pen is enjoying in France.'