UK shares rebounded on Tuesday from their lowest closing level in three years in the previous session after Chinese GDP figures met expectations while leaving room for further stimulus. Data from China showed that the country's economic growth eased to 6.8 percent in the fourth quarter from a year earlier, in line with expectations but still the slowest since the financial crisis.
Investors, however, were hopeful for further economic stimulus measures from the Chinese government after the world's second biggest economy saw its weakest growth last year in a quarter of a century. While growth figures met consensus predictions, industrial output slightly missed expectations. "It doesn't show a massive deceleration in the Chinese economy, and the slight miss does just give policymakers the opportunity to add a bit more stimulus, particularly while inflation's low," said Jasper Lawler, market analyst at CMC Markets.
Asia-exposed bank HSBC rose 1.9 percent to add 6.7 points to the FTSE 100, the biggest contributor to the index. The FTSE 350 Mining index was up 2.1 percent after gaining nearly 7 percent earlier in the session. The price of copper touched its highest in more than a week before drifting. The price of oil also bounced following strong Chinese fuel consumption figures, stemming a slide to 2003 levels earlier in the week after Iran returned to markets with plans to add to a large supply glut.
The FTSE 350 Oil and Gas index rose 1.4 percent, also off the day's highs. The bluechip FTSE 100 index was up 96.88 points, or 1.7 percent, at 5,876.80 points by the close, recovering after it closed at its lowest level in three years in the previous session. Concern over Chinese growth and oil prices has seen the index lose over 5 percent already this year, but some said that China would be able to manage effectively the slowdown in its economy.
"For 2016, we expect that the Chinese leaders will keep the situation of a managed slowdown largely under control, albeit with bouts of stress as financial liberalisation goes on," Susan Joho, economist at Julius Baer, said in a note. The index was supported after Bank of England Governor Mark Carney said he had no set timetable for a rate rise and warned of the effects of a slackening Chinese economy on Britain. His remarks sent sterling to a 7-year low and boosted the FTSE to session highs.
Shares in British insurer Prudential were up 3.4 percent after the company posted a slightly above-forecast capital ratio under new European rules. Among mid-caps, shares in online grocery retailing company Ocado increased 6.8 percent, having been up as much as 15 percent, after British media reports that Amazon was preparing a bid for it.
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