The FTSE 100 closed higher on Tuesday as falling oil prices and anticipation of major US earnings lifted investor sentiment across global markets.
The FTSE 100 Index closed up 31.84 points, or 0.3%, at 10,886.16, while the FTSE 250 ended up 138.57 points, or 0.6%, at 24,856.05.
Melrose Industries (MLS) claimed the top spot on the FTSE 100, surging 10% after confirming it will not face a criminal investigation related to its Garden Grove site in California.
The Birmingham-based aerospace and defence company said it is targeting late September to resume manufacturing at the site, after an overheating chemical tank forced a mass evacuation in May.
A claims programme will be launched to provide up to 100 million dollars for residents and businesses seeking damages from the incident.
Citigroup analyst Charles Armitage said that although some civil fines remain possible, “we believe this largely quantifies the financial impact of the incident and materially reduces the risk for investors.”
In the United States, stocks climbed ahead of Nvidia’s (NVDA) closely watched earnings report, with the Dow Jones up 0.1%, the S&P 500 up 0.2%, and the Nasdaq Composite rising 0.4%.
Nvidia (NVDA) shares stood 1.1% higher ahead of its results, which will be released after the Wall Street close on Wednesday.
Kathleen Brooks, research director at XTB, said the market is starting “to price in the effects of a potential monster earnings report that restores faith in the AI trade.”
Brooks added that “the most actively traded stocks in the US right now are all the major AI names, including Nvidia, Tesla, Micron and SanDisk,” describing Nvidia’s results as a key driver of potential volatility later in the week.
In Europe, Germany’s DAX 40 rose 0.7% after the ifo Institute reported that German business confidence climbed more than expected in August, with the index rising to 88.8 points from a revised 86.7 points in July.
JPMorgan analyst Greg Fuzesi noted that “the larger-than-expected jump in today’s ifo, driven by improved current conditions and expectations, reinforces the sense of cyclical lift and comes despite the renewed increases in energy prices.”
Lower oil prices also provided broad support to financial markets, with Brent crude for October delivery trading at 89.31 dollars a barrel, down sharply from 92.74 dollars late on Monday.
David Morrison, senior market analyst at Trade Nation, pointed to speculation of a “sudden, and unexpected, breakthrough in US-Iranian negotiations” as the key reason behind the oil price decline.
Morrison noted that “Field Marshal Asim Munir, Pakistan’s Chief of the Army Staff, was returning to Tehran after talks yesterday with an offer to halt the US blockade and lift sanctions under the memorandum of understanding.”
Back in London, Next rose 2.4% after Citigroup upgraded the stock to “buy” from “neutral,” with analyst Monique Pollard arguing the retailer now deserves a higher valuation given its rapid international expansion.
Pollard wrote that Next’s international segment has grown at a 20% plus five-year sales compound annual growth rate through 2025, now making up more than 20% of product revenue.
On the FTSE 250, Vistry surged 16% after securing an initial grant of £350 million as part of the UK Government’s £39 billion social and affordable homes programme, described as the largest award possible in the first allocation of funding.
Russ Mould, investment director at AJ Bell, called the award a “major fillip” for chief executive Adam Daniels but cautioned that Vistry “is in the unenviable position of requiring a big second-half improvement to hit its full-year profit targets.”
Jupiter Fund Management rose 4.3% after Berenberg initiated coverage with a “buy” rating and a 187p price target, while Smarter Web shares fell 8.5% after announcing the departure of its head of bitcoin strategy, Jesse Myers, effective September 1.