The FTSE 100 has jumped to a more than two-month high despite a new Organisation for Economic Co-operation and Development (OECD) report casting an unmissable shadow over the UK’s economic prosperity.
Energy giants moved to the top of London’s blue-chip index with the likes of Shell, BP and Harbour Energy all seeing their shares rise by more than 4%.
The boost comes despite the OECD predicting the UK’s economy will contract more than any other of the world’s seven most advanced nations next year.
It is expected to shrink by 0.4% in 2023 and grow by just 0.2% in 2024.
Nevertheless, investors flocked to the London Stock Exchange as oil prices saw a rebound, helping to push up the FTSE.
The FTSE 100 closed 75.99 points higher, or 1.03%, at 7,452.84.
Joshua Mahony, senior market analyst at online trading platform IG: “European markets have provided an area of optimism today, with equities outperforming their US counterparts despite growth concerns raised by the OECD.
“Quite how much markets are listening to the OECD is questionable, with both the FTSE 100 and pound gaining ground despite claims that we will see a measly 0.2% growth in 2024 after next year’s contraction.
“While the effects of Brexit have been largely masked by the Covid pandemic, the outlook remains bleak over our ability to grow our way out of this current crisis.
“Nonetheless, with the Bank of England likely to take a more accommodative stance once inflation is brought under control, the ability to predict when the UK returns to health will be reliant on driving down prices.
“Unfortunately, the OECD predict that the UK energy price cap will serve to lift inflation, thus limiting the ability to combat the stagflation that is expected to dominate 2023.”
The pound also moved higher against the US dollar and the euro on Tuesday. Sterling was around 0.5% higher at 1.1876 against the dollar, and 0.2% higher at 1.1559 against the euro when European markets closed.
Brent crude oil was up 2.09% to 89.28 dollars per barrel.
European stocks also enjoyed an uplift, albeit at a steeper rate than in London. The German Dax was up 0.29% and the French Cac lifted 0.35%.
In the US, its top indices were also in the green when European markets closed. The S&P 500 was up by 0.75% and Dow Jones was 0.81% higher.
In company news, shares in AO World surged by more than 16% despite revealing its half-year losses had widened after sales fell.
But the delivery company assured investors its full year underlying earnings would be at the top end of previous guidance as it steams ahead with turnaround plans, including cost-saving measures.
Water company Severn Trent said its underlying pre-tax profits hit more than £260 million in its half-year earnings, as it reported it is ramping up support efforts for vulnerable customers and investing in its regions.
Shares in the UK’s second-biggest water firm dipped by 0.69% on Tuesday.
Meanwhile, the share price of food manufacturer Cranswick moved up after the group said it is making good progress despite the “relentlessly challenging” operating environment.
It said its half-year revenues are up by a tenth and its new factory in Hull is performing well. Its share price was up 3.95% at the end of the day.
The biggest risers on the FTSE 100 were Harbour Energy, up 21.1p to 320.6p, BP, up 29.85p to 488p, Entain, up 69p to 1,365p, Shell, up 110p to 2,382.5p, and Glencore, up 18.05p to 514.9p.
The biggest fallers on the FTSE 100 were Airtel Africa, down 4.2p to 115.6p, Hargreaves Lansdown, down 28.6p to 808.4p, Vodafone, down 3.11p to 95p, St James’s Place, down 30p to 1,148.5p, and Ocado Group, down 14p to 631.2p.