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LONDON (Alliance News) - UK stock indices rose strongly Tuesday, amid broad gains by equity markets in Europe and the US, as hopes grew that the European Central Bank would take further steps to boost the flagging eurozone economy.

The UK third-quarter earnings season also ramped up, creating some stand-out stock movers within the London indices.

The FTSE 100 ended 1.7% higher at 6,372.33, the FTSE 250 closed up 1.8% at 15,024.97, and the AIM All-Share closed up 1.8% at 705.15.

In Europe, the French CAC 40 closed up 2.3% and the German DAX up 1.9%, while the DJIA was up 0.8%, the S&P 500 up 1.4%, and the Nasdaq Composite up 1.7% when the European equity markets closed.

Equity markets across Europe got a boost in afternoon trade after Reuters quoted four people familiar with the matter saying that the ECB is considering buying corporate bonds on the secondary market as part of its efforts to encourage lending to businesses in the eurozone. The central bank could take a decision regarding the matter as soon as December with an aim to start the purchases early next year, Reuters said.

The Reuters report also quoted an ECB spokesman saying that "the Governing Council has taken no such decision".

Equity markets have been volatile over the past week or more, as concerns grew that the eurozone is edging back towards recession and the wider global economy has not yet achieved sustained growth at a time when the US Federal Reserve is about to end its massive stimulus programme. Investors are looking to the ECB to provide more stimulus to stave off the threat of a further downturn in the eurozone.

"I think equity markets are certainly deriving some comfort from the mere prospect of further ECB intervention, but I think the prospect of it remains unlikely this year, if it happens at all, said CMC Markets chief market analyst Michael Hewson.

The London equity markets had been trading higher before the report of possible new ECB intervention emerged, after a raft of Chinese economic data overnight. Chinese GDP grew by 7.3% year-on-year in the third quarter, marking the weakest expansion since early 2009. The growth was slower than the 7.5% growth recorded in the second quarter, but better than the 7.2% that had been expected by economists.

Alpari Market Analyst Craig Erlam called the data "doubly positive", as it beat expectations but also left the door open for further targeted stimulus from the People's Bank of China as it missed the government's official 7.5% growth target.

Chinese retail sales growth slowed to 11.6% year-on-year in September, from 11.9% in August, slightly missing expectations for growth of 11.8%. Meanwhile industrial production expanded faster than expected, by 8.0%, up from 6.9% in august. Analysts had expected growth of 7.5%.

The oil price rose through the morning on the expectation of increased demand given the strong Chinese production numbers. While oil remains significantly lower than a month ago, Brent Crude gained as much as 1% in the morning session to reach USD86.45, an improvement from the near four-year low of USD82.90 made toward the end of last week.

The firmer oil price provided a boost to oil producers and related stocks, with Tullow Oil gaining 3.5%, Royal Dutch Shell up 3.5%, BG Group up 2.0%, Ophir Energy up 5.8%, and Petrofac up 3.1%.

Travel-related stocks were also amongst the best performers of the day in the absence of news of any further spread of the Ebola virus. Holiday operator TUI Travel was the best FTSE 100 performer, up 4.7%, with cruise ship operator Carnival up 4.5%, and FTSE 250-listed holiday group Thomas Cook up 6.1%. The stocks had been punished as fears grew that Ebola might be spreading outside Africa.

Tesco shares continued to gain ahead of the company's interim results on Thursday, ending up 3.7%. Kantar grocery market data showed that Tesco managed to slow its market share decline over the 12 weeks to October 12. Tesco's market share was 28.8%, down from 30.1% a year earlier, but unchanged from the previous 12 weeks. A 3.6% drop in sales over the 12 week period was the best reading for the supermarket since June, Kantar said. The data follows weekend reports that Tesco will not have to adjust its earnings on Thursday, despite its previously warning of a GBP250 million accounting error.

ARM Holdings was the worst performing stock in the FTSE 100, ending 5.3% lower, despite saying it expects to meet its expectations of about USD350 million in revenue for the fourth quarter after it posted a pretax profit of GBP79.2 million for the third quarter to end-September, up from GBP68.3 million a year before. Third quarter revenue rose to GBP195.5 million, from GBP184.0 million.

ARM had opened higher after Apple, which licences ARM's microchips for use in its products, reported bumper sales and expressed confidence ahead of the key Christmas season Monday night. However, Liberum Capital said it was concerned about slowing growth in the tablet market and said that strong licensing growth at ARM may not lead to strong royalties growth for the UK chip maker.

Reckitt Benckiser Group fell 1.8% after reporting that its third quarter earnings were badly hit by the strength of the pound. The consumer goods giant reported net revenue of GBP2.37 million for the third quarter, up 2% at constant exchange rates, but down 7% at actual rates. In the year-to date, revenue of GBP7.04 billion is down 7% at actual exchange rates, but up 3% at constant currency.

ASOS shares had their best day for a long time, rising 15% after it said it has started looking for a new chief financial officer after moving Nick Beighton to the role of chief operating officer, tasked with helping return it to growth after a couple of years where heavy investments in expansion and countering operational issues will hold it back.

The AIM-listed online fashion retailer reported a drop in pretax profit to GBP46.9 million for the financial year ended August 31, down 14% on its GBP54.7 million pretax profit it reported a year earlier. The fall was in line with expectations, due to heavy investments and a hit due to the strength of sterling. Chief Executive Nick Robertson also warned the company also faces another year of stunted growth.

The euro came under pressure after the reports of potential ECB bond buying. The single currency slipped almost 1.0% against the dollar to reach a four-day low of USD1.2714. Against the pound, the euro reached a one-week low of GBP1.2692. Against the dollar the pound trades a little higher at USD1.2675.

The gains in the pound came despite UK borrowing numbers coming in higher than expected. Public sector net borrowing in the UK was GBP12.6 billion in September, up from GBP10.9 billion in August and compared with expectations for a fall to GBP9.2 billion. A lack of wage growth was blamed for stagnant income tax takings, while the biggest rise in tax income for the government has come from stamp duty on the buying of homes.

The UK economy will be in further focus Wednesday when the Bank of England released the minutes of its October policy meeting at 0930 BST. The committee elected to keep the UK base rate on hold at a record low of 0.5% at the meeting, but given that two of its members voted for a rate rise in September, investors will be keen to see how the vote was split this month.

The UK earnings season continues apace with third quarter results due from GlaxoSmithKline, full year numbers from Spirit Pub company, and interim results from Home Retail Group. British American Tobacco and Playtech are amongst those releasing interim management statements.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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