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A powerful wave of optimism continued to wash over global markets on Wednesday, propelling European equities higher as investors extended a record-setting rally built on fervent hopes of a major US interest rate cut.
The positive sentiment was palpable across the continent, though a closer look at London’s market revealed a more complex and divergent story.
Twenty minutes into the session, the pan-European Stoxx 600 was up a solid 0.45%, with Germany’s DAX leading the charge with a 0.7% gain. France’s CAC 40 followed with a 0.4% rise.
In London, the FTSE 100 also perked up, hitting another record level as it climbed 0.3%.
This continental upswing is helping to push global stocks into uncharted territory, with the MSCI All Country World Index building on gains from Tuesday’s post-inflation rally in the US and a strong session in Asia.
The great divide in London
Despite hitting a fresh peak, the FTSE 100’s advance was noticeably more subdued than its European peers, painting a picture of a market being pulled in two different directions.
Providing the biggest boost were healthcare and defense heavyweights, with drugmakers like AstraZeneca and GSK and contractor BAE Systems lifting the index.
However, this upward momentum was being actively fought by powerful headwinds.
The biggest drags on the UK benchmark were oil giants Shell and BP, whose shares fell in tandem with slipping crude prices ahead of talks between US and Russian leaders.
The pain was compounded by company-specific news, as insurer Beazley plunged as much as 7% to its lowest level since July after it slashed its growth guidance, while homebuilder Persimmon also slipped following its latest results.
A tale of tech and energy
The FTSE’s relative underperformance highlights a key structural difference between the UK index and its continental counterparts.
The energy sector, where BP and Shell are dominant forces, was the worst-performing group across the entire Stoxx 600 this morning.
At the same time, the day’s best-performing group in Europe was technology—a sector in which the UK’s benchmark is notoriously lacking.
This divergence explains why, even on a record-setting day, London struggled to keep pace with the more tech-heavy indices in Frankfurt and Paris.
Still, the underlying bullish sentiment was undeniable. The British pound found a bit of wind in its sails, rising past the $1.35 mark, while government bonds, or gilts, bounced back with yields falling.
The global mood, ignited by speculation that the Federal Reserve might opt for an outsized 50-basis-point rate cut, continues to suggest that for now, the only way is up.
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