January 2, 2020 / 8:41 AM / a month ago

UK shares roar into 2020; midcaps hit fresh record

(Reuters) - Britain’s stock market indexes surged in the first trading session of the new decade, as investors welcomed China’s monetary policy easing and U.S. President Donald Trump set the date for sealing a Phase 1 trade deal with Beijing.

FILE PHOTO: People check their mobile phones as they stand outside the entrance of the London Stock Exchange in London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls

The FTSE 100 .FTSE jumped after two straight sessions of losses to rise 0.8% after China cut the reserve requirement ratio (RRR) for banks and Trump said a Phase 1 trade deal with Beijing would be signed on Jan. 15.

Mining shares .FTNMX1770 and oil majors were among the top gainers, with Antofagasta (ANTO.L), Glencore (GLEN.L) and BP (BP.L) advancing between 2%-3.1%.

The FTSE 250 .FTMC soared 1% to notch up a fresh record high and the British indexes enjoyed their best day since mid-December, when Prime Minister Boris Johnson's election win and de-escalating trade tensions had triggered a rally in equities.

Gains were further supported by strong demand for cyclical stocks such as banks, that led blue-chips Lloyds (LLOY.L) and Barclays higher by 2% and 3%, respectively.

But despite Thursday’s rise, which came after two sessions of profit-taking following the FTSE 100’s best run in three years, analysts warned against getting carried away, citing thin trading volume and calling China’s policy predictable.

“The move on the RRR had been well telegraphed but came as a welcome New Year’s gift,” OANDA analyst Jeffrey Halley said.

Cityindex analyst Ken Odeluga echoed that Beijing’s policy decision wasn’t surprising, adding that though a signing date for Phase 1 was set, uncertainties remained about if and when more comprehensive trade agreements would be nailed down.

“As much as investors are keen to ring-in the New Year with sure-footed gains, these influences are of course ‘so 2019’,” he said.

“Predicating a positive risk-asset rally on them continues to ignore a whole host of well-rehearsed reasons to remain cautious.”

Tullow Oil (TLW.L), which plummeted more than 70% last month after it scrapped its dividend and its CEO stepped down, plunged as much as 20% following underwhelming results of drilling at its Carapa-1 well offshore Guyana.

“The results from the Carapa-1... are, in our view, a negative,” Berenberg analysts wrote. They added that the four metres of net oil pay reported from the well was unlikely to be commercial.

Reporting by Shashwat Awasthi in Bengaluru; Editing by Shailesh Kuber

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