The FTSE 100 rebounded as traders put aside concerns over the forthcoming Greek election and interpreted data showing the eurozone in deflation as a signal that the European Central Bank (ECB) will start printing money later this month.
The index was also aided by bargain hunters trying to call the bottom on the oil price drop after Brent crude dipped below $50 a barrel but rebounded. The Footsie added 53.32 points at 6,419.83.
Connor Campbell, financial analyst at Spreadex, said: “Investors decided to take the positive view of the Eurozone’s slide into deflation, seeing it as yet another signal that ECB quantitative easing must be on its way, and ignoring the actual economic implications of such a fall.
“Unsurprisingly the euro was the main loser of this rally, hitting new nine-year lows as the currency was once more spooked by the spectre of QE.”
Among the oil stocks, BP rose 2.7p to 393.75p and Royal Dutch Shell lifted 27.5p to 2,148.5p.
Meanwhile rare positive session for a number of supermarket stocks failed to last, despite Sainsbury’s announcing a smaller-than-expected decline in like-for-like sales for the last quarter. Sainsbury’s shares opened higher despite the company’s first Christmas sales decline in a decade, but the rally fell flat amid fears that the firm would lose out should there be a turnaround in the fortunes of larger rival Tesco under new boss Dave Lewis.
Sainsbury’s shares closed the day 5p lower at 229.6p but Tesco was 3.2p higher at 182p on hopes that the beleaguered market leader may have done better than expected over the Christmas period.
Marks & Spencer shares were also 2 per cent stronger, up 8.8p to 463.2p, ahead of its own festive figures.