Shares were given a boost yesterday by a surprise cut in Chinese interest rates designed to restore growth to the government’s 7.5 per cent target.
China’s rate cut, the first reduction in two years, came after growth in the world’s second-largest economy slowed to a five-year low which contributed to a recent decline in commodity prices and mining stocks.
Tony Cross, market analyst at Trustnet Direct, said: “Mining stocks – which have been under a weight of pressure of late – were the stand out winners, with both Anglo American and Rio Tinto adding more than 6 per cent. That said, given the underlying issue of falling commodity prices and surplus supply, at least part of this recent rally could prove to be an overreaction – cheaper lending in China will help, but it’s no silver bullet.”
Anglo American surged 86.5p to 1,380p and Rio Tinto improved 177p to 3,042p, with Fresnillo up 38.5p at 763.5p.
As the price of Brent crude crept back to around the $80 a barrel mark, shares in Tullow Oil also rose 6 per cent, up 27.7p to 505p. Royal Dutch Shell added 38p to 2,391p and BP climbed 6.8p to 448.2p.
The rally came as European Central Bank president Mario Draghi pledged to bring the eurozone’s low inflation rate back to target “without delay”, giving a further boost to markets. The FTSE 100 added more than 1 per cent, climbing 71.86 points to 6,750.76, with its Continental peers making even greater gains.
Elsewhere, risers included Rolls-Royce after the engines giant secured an order from Delta Air Lines worth £3.2 billion to power 50 Airbus planes. The deal lifted shares by 9.5p to 853.5p.
Troubled outsourcing firm Serco fell 5 per cent to 170p in the FTSE 250 Index after Credit Suisse downgraded the stock and slashed its price target.