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The FTSE 100 rallied on Friday to close the week solidly higher after the European Central Bank signalled interest rate hikes may be nearing an end for now. Gains by China-linked mining stocks also boosted UK equities.
The FTSE 100 ended up 0.5% on the day and jumped over 3% across the week. The domestically-focused FTSE 250 dipped 0.6% on Friday but still closed the week nearly 2% higher.
Upbeat mining shares came after data showed retail sales and industrial output in China rebounded more than expected in August, easing growth concerns. Endeavour Mining ended 5% higher while Fresnillo and Anglo American added 3% and 1%.
The figures offered some relief after a run of disappointing data from the world’s number two economy. Further policy support pledged by China’s central bank aided sentiment.
Dovishness from the ECB underpinned broader gains. After hiking rates, the ECB dropped language about further increases, prompting speculation a peak is approaching. President Christine Lagarde said rates are now at levels that can control inflation if maintained over time.
“This shift from ‘how high’ to ‘how long’ signals markets believe rates have peaked,” said Brown Brothers Harriman. But the ECB can’t explicitly call an end yet, it noted.
In corporate news, wargaming miniatures firm Games Workshop jumped 11% following a strong quarterly sales update. Infrastructure group Kier extended gains, up 9%.
Across the Atlantic, anticipation is building ahead of the Federal Reserve’s policy meeting next week as debate continues over when it may slow the pace of rate hikes amid tentative signs of a growth slowdown.
For now, further significant tightening looks likely until inflation shows clearer signs of easing back toward the Fed’s 2% target. But any dovish nuances could buoy markets.
With potential peaks on the horizon, investors are monitoring central banks’ balancing acts closely. Their ability to gently land economies as headwinds strengthen will remain in focus into year-end.