London stocks open 1.4% stronger

Investors cheer end to uncertainty after first Fed rate hike in close to a decade.

London stocks have opened sharply stronger in the wake of the US Federal Reserve’s first interest rate rise in over a decade, as investors who had sold off prior to the hike bought back in.

Five minutes after the official 8am (GMT) London Stock Exchange Open, the benchmark FTSE 100 was bid 1.4 per cent higher, to 6,145.74 points as investors celebrated the end to a long period of uncertainty.

“As markets absorb last night’s events in Washington attention switches back to the UK economy today and the possible timing of a UK rate rise,” CMC Markets analyst Michael Hewson said. “In the process giving Bank of England Mark Carney the opportunity to perform another about turn in the New Year, perhaps, when things come into ‘sharper focus’.”

But UBS’s Paul Donovan warned there was still plenty of opportunity for markets to misprice US Fed tightening.

“With data revisions more frequent and tending to be biased to the upside, the market tendency to focus on initial rather than revised data may lead to underestimation of the Fed,” he said.

Among FTSE 100 favourites, Banking group Old Mutual and supermarket giant Sainsbury’s were the top performers in early trade, while mining companies continued to lag.

Local data set for release in the session includes UK releases retail sales data, while Germany reveals its latest ifo business confidence survey.