UK stock market surges by nearly £50bn as 'Boris bounce' continues - business live

Rolling coverage of the latest economic and financial news

• Latest: UK stock market surges for second day running
• Banks, utilities and industrial stocks all rally again
• UK PMIs show economy struggling in December
• PMI falls to 48.5, showing sharpest contraction in 41 months
• Introduction: US-China trade deal lifts markets
• End of political paralysis in UK

4.46pm GMT

BOOM! Almost 50bn has been added to the value of Britain's biggest companies, as the City continues to celebrate Boris Johnson's election victory.

The FTSE 100 index of top blue-chip companies has just closed 165 points higher at 7519 points, which is a four month high.

With clarity on Brexit and a first phase trade deal agreed investors are more than ready to jump aboard the Santa rally.

This is the last full week of trading prior to the Christmas break, which means that volumes will be starting to thin out and any moves in the market could be exaggerated.

4.24pm GMT

With just a few minutes to go, the Footsie is firmly on track for its best day in three years...

It's currently up 195 points, or 2.66%, at 7548. Still time for a late collapse, though.... #unlikely

3.48pm GMT

Upbeat economic data from America is also pushing shares higher.

US business activity grew at its fastest pace in five months, IHS Markit reported.

Flash US Composite PMI at 52.2 in December (Nov - 52.0) as business activity, order books and jobs growth all accelerated to the strongest in 5 months. However, 4th quarter PMI results signal annualised GDP growth of just 1.5%. More here: https://t.co/8NSMJBvMuw pic.twitter.com/ZjQO8gOmKK

The National Association of Home Builders' Housing Market Index rose by 5 points to 76 - the highest reading since June 1999 - exceeding economists' forecasts for a reading of 70, according to a Reuters survey.

US homebuilder confidence climbs to 20-year high https://t.co/JguiUdqyjL

3.31pm GMT

The Dow Jones industrial average is also joining the party, hitting a record high a moment ago.

The Dow is up 195 points, or 0.7%, at 28,330. Tech stocks are among the risers, after Donald Trump cancelled plans for new tariffs on Chinese-manufacturer products on Sunday. Telecoms equipment maker Cisco is up 2.8%, and Apple up 1.65%.

3.27pm GMT

Retail chain Sports Direct continues to lead the London Stock Market.

It's up a staggering 30% today after reporting a 160% surge in profits for the last six months, with revenues up 14% following its acquisition of House of Fraser (leading to the company's name change to Frasers today)

Sports Direct killing it today pic.twitter.com/NeDTHFmChx

3.15pm GMT

Today's rallies in Europe, the UK and Wall Street has driven global stock markets to their highest ever levels.

The MSCI All-Country World Index, which measures stocks around the globe, has risen by 0.7% today to record levels.

2.47pm GMT

Wall Street has also opened at a record high, as trade war optimism ripples through New York.

Both the broad S&P 500 index and the tech-focused Nasdaq indices hit new peaks.

STOCKS AT THE OPEN:
- Dow up 0.35%
- Nasdaq up 0.68%
- S&P up 0.67% pic.twitter.com/wo3h7yjgfh

2.40pm GMT

Boom! The FTSE 250 index has hit a new record high.

The index of medium-sized companies is up 385 points today, or 1.8%, at 21893.

2.34pm GMT

The FTSE 100 index is firmly on track for its biggest one-day bounce since the aftermath of the EU referendum.

The blue-chip index is currently up 2.6%, or 190 points, at 7543, as investors continue to drive stock prices higher.

2.09pm GMT

There's another factor behind the market rally -- central bankers are maintaining easy monetary policy, and unlikely to raise interest rates anytime soon.

This a market that will continue to be driven by liquidity, says @elerianm. "We've had the biggest relaxation of financial conditions since 2009. That's an enormous statement and that's why the markets are doing so well and have been so constructive." pic.twitter.com/xuP56elPP2

Happy Monday! Markets have that end-of-the-year feel. Bond yields edge higher on hopes trade deal will boost growth. Dollar continues to slip and Fed keeps adding liquidity.

1.49pm GMT

Here's our news story on the UK"s higher borrowing forecasts, and the deterioration in the UK economy this month:

Related: Boris Johnson's tax plans face squeeze as public finances worsen

1.20pm GMT

America's S&P 500 and Nasdaq indices are expected to hit fresh record highs when trading begins in just over an hour's time.

Relief that the US and China have agreed a preliminary trade deal (although it's not signed and sealed yet) is lifting the mood on Wall Street.

US Opening Calls:#DOW 28213 +0.27%#SPX 3186 +0.53%#NASDAQ 8539 +0.59%#RUSSELL 1650 +0.76%#FANG 2940 +0.65%#IGOpeningCall @IGSquawk

1.16pm GMT

UK house prices are also expected to benefit from Boris Johnson's return to power.

Property website Rightmove has predicted average prices will rise by 2% in 2020, with stronger prices in the North of England.

Related: House prices predicted to rise by 2% in UK - with the north leading the way

1.07pm GMT

Every sector that makes up the FTSE 100 is up today, in a broad-based rally.

By my maths, around 43bn has been added to the value of the Footsie today, on top of 20bn on Friday as the Conservative Party won Thursday's election.

12.40pm GMT

Russ Mould, AJ Bell investment director, reckons the FTSE 100 index could climb to 8,000 points in a year's time, from around 7,500 today.

He argues that the UK stock market has been "unloved" for some time, and arguably undervalued compared to likely corporate earnings.

"Granted, the issue of Brexit must still be resolved and doubts continue to hover over the health of the global economy. However, were the UK to strike a trade deal with the EU, Washington and Beijing to settle their differences once and for all and governments around the world abandon austerity and launch looser fiscal policies then the world could look very different.

"Even if the FTSE 100 fails to challenge the 8,000 mark, investors may still be able to prosper through careful stock selection, as the index is packed with companies which either look cheap on an earnings basis, offer a fat dividend yield, or both.

12.11pm GMT

This is from Ben Chu of Newsnight about today's weak UK business data, and strong market rally:

THREAD

What now for the UK economy after #GE2019 ?

Well, the latest UK composite PMI business survey for December this morning is VERY weak - slipped further into contraction territory....

Consistent with 0.2% CONTRACTION of GDP in Q4 on historic patterns... pic.twitter.com/DDYPCkKhBp

....yet the mood in markets is very different in the wake of the Conservative election victory last week.

FTSE 100 stock market is up strongly this morning... pic.twitter.com/QlM8Qdvusd

...and sterling has popped to its highest since May 2018... pic.twitter.com/b5AoWu0JgE

...Two big macroeconomic questions:

1) Can the UK buck the global economic slowdown trend?

2) Will the election result really "unlock 100bn of investment" as Boris Johnson promised in the election campaign?...

...A reminder - UK real business investment has gone essentially nowhere for four years: pic.twitter.com/EiEaxSwtpD

12.02pm GMT

Britain's FTSE 250 index of medium-sized companies is also having a strong day.

It's up 1.2% or 258 points at 21766, back towards the record high touched on Friday.

Mike Ashley's retail empire forecasts profits of up to 390.3m for the year to April 2020 after underlying pretax profits increased 58% to 101.8m in the first half. Losses almost halved to 15.9m at its premium lifestyle business, which includes House of Fraser, although the group plans to close more branches in the coming year.

Sales for the half year to 27 October rose 14% to 2bn, largely as a result of the inclusion of House of Fraser and growth at Flannels, the group's designer fashion chain. Excluding acquisitions, revenue at the core sports business fell 8.6%.

Related: Sports Direct profits rise as it cuts House of Fraser losses

11.26am GMT

Rupert Harrison of BlackRock (a former top Treasury official) predicts better times ahead for the UK economy:

FTSE 100 is on a tear today. Global investors have been underweight the UK since 2016, now reallocating back given hugely reduced uncertainty

I suspect the same reduction in uncertainty will unleash some corporate investment and boost the real economy, despite poor PMIs today pic.twitter.com/Q6bN5H0F7I

11.11am GMT

In another blow, Britain's fiscal watchdog has revised up its forecasts for government borrowing.

The deficit will be roughly 20bn higher per annum over the next five years, the Office for Budget Responsibility has calculated.

We have restated our March 2019 borrowing forecast to include recent ONS statistical changes but have not incorporated any other new data, new judgements nor include an update to the economy forecast.

After incorporating these changes, borrowing has increased materially by around 20bn each year.

Borrowing is revised up by 20bn a year by @OBR_UK - should remind returning ministers that economic outlook isn't as rosy as their political one. Slow global growth and a tiny margin for error against the brand new fiscal rules mean tax rises are more likely than tax cuts pic.twitter.com/QtrspVXocQ

10.56am GMT

Britain's economic weakness could prompt the Bank of England to cut interest rates soon, suggests Capital Economics.

They told clients that borrowing costs could be lowered, from 0.75%, early in 2020 if the PMIs don't improve.

The weak flash PMIs for the UK are another piece of evidence that suggests growth flat-lined in Q4. And if there isn't a pick-up in the surveys in the next few months, then the MPC may respond by cutting interest rates.

Factbox: Britain set to announce next Bank of England governor https://t.co/OapaEh9gC9 pic.twitter.com/SKqtnQnlYN

10.45am GMT

Howard Archer of EY Item Club suspects that the UK's PMI readings may improve, now the election is over.

Needs to be borne in mind that December flash #UK #PMI's were carried out at time of particularly heightened uncertainty - run-up to General Election. Also bear in mind that November "flash" PMIs were revised up appreciably for both #services & #manufacturing https://t.co/PJW7RIIIeR

10.33am GMT

Markit's PMI surveys are based on interviews with managers at companies across the world economy.

This makes them more timely than official GDP data, and a handy gauge to sentiment in the economy. However, they don't always match up with the growth statistics, and can be more negative if bosses are most anxious.

U.K. PMIs point to output/GDP shrinking 0.2% in Q4 BUT have been overly pessimistic...gulf suggests these surveys might be more indicative of investment activity (still dismal) than output

Preliminary estimate of UK PMI painting a pretty gloomy picture in Q4, falling from 49.3 in Nov to 48.5 in Dec. Will be interesting to see if this is matched in the official GDP growth stats, as PMI has not matched up v. well of late. Manufacturing fell to 47.4 & services to 49.0 pic.twitter.com/7fq0xy7V9u

10.17am GMT

There's quite a contrast between UK economic activity in December (down down down), and the UK stock market (up up up)

Flash UK Composite Output PMI falls to near three-and-a-half-year low in December (48.5; 49.3 - Nov). Notably, manufacturing output fell at a rate exceeded only once since the global financial crisis, while services recorded back-to-back declines. More: https://t.co/RX2gmqqyuW pic.twitter.com/Nk3mzG7N30

10.03am GMT

The City has responded to the grim PMI survey by..... driving shares even higher.

The FTSE 100 is now up 157 points, or 2.1%, and on track for its best day since June 29 2016.

9.56am GMT

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, blames anxiety over Brexit and the general election for the slump in business activity this month.

"The continuing Brexit-related aversion to investment and a pre-election lack of consumer confidence led to the fastest fall in business activity in December since July 2016....

The biggest shock came in the form of the worst output performance from the manufacturing sector since July 2012. A lack of new orders and the unravelling of pre-Brexit inventories hampered progress and supply chain managers' purchasing dropped at the fastest pace since 2009 in the absence of a pipeline of work ready and waiting.

The Brexit path is still littered with obstacles and the need for strong negotiation skills for a future EU agreement will be paramount to avoid this downward slide becoming the economic landscape for an extended period."

9.50am GMT

Chris Williamson, chief business economist at IHS Markit, fears that the UK economy may contract in the final three months of 2019, given today's weak PMI report.

That would put Britain back on the brink of recession - having also contracted in April-June, but grown in July-September.

"December's PMI survey data sadly lacked festive cheer, indicating that the economy contracted for the third time in the past four months. The latest decline was the second- largest recorded over the past decade, and increases the likelihood that the economy contracted slightly in the fourth quarter as Brexit-related uncertainty intensified in the lead up to the general election.

"New orders fell for a fifth straight month, causing jobs to be cut for a fourth successive month as firms scaled back operating capacity in line with weakened demand.

9.40am GMT

NEWSFLASH: Britain's private sector is continuing to shrink this month, raising fresh feats that the economy.

Data firm Markit's "Flash UK Composite Output Index", which tracks activity across the sector, has dropped to just 48.5 for December.

9.26am GMT

Shares are climbing steadily higher in London, lifting the FTSE 100 index to a four-month high.

The Footsie is now 130 points up, or 1.77%, at 7483, its highest level since early August.

9.12am GMT

Just in: European companies have just posted their weakest growth in five years

That's according to the latest survey of purchasing managers at eurozone companies, which contrast sharply with the sizzling mood in the markets.

The eurozone economy failed to pick up momentum in December, according to the flash PMI, rounding off a fourth quarter in which output rose at the weakest pace since the economy pulled out of its downturn in the second half of 2013. Employment growth slowed to a five-year low and price pressures moderated further.

However, while the manufacturing recession deepened, the service sector showed welcome signs of resilience in the face of the headwinds from the factory downturn.

8.47am GMT

NEWSFLASH: European stock markets have hit an all-time high.

The STOXX 600, which tracks companies across Europe, has gained 0.5% this morning.

The US agreed to one of China's key red lines, i.e. rolling back pre-existing tariffs. However, that reversal has been described as 'minimal' - 25% tariffs will be maintained on around $250 billion in goods, while only $120 billion will see the charges reduced to 7.5%.

As for Trump's key demands, China will now reportedly purchase an extra $16 billion in agricultural goods per year, on top of the $24 billion already pencilled in, taking the total in 2020 and 2021 to at least $40 billion. The President himself said he thinks 'they'll hit $50 billion', and that they've 'already stepped it up'.

8.36am GMT

Mark Haefele, chief investment officer at UBS Global Wealth Management, predicts stock markets could keep rallying in the coming months.

We think it is significant that the announcement represents the first time that trade negotiations have successfully led to an actual reduction in tariffs, rather than a mere delay.

We may have reached the point of "peak tariffs" and this deal could be the start of a series of phased rollbacks, which could unlock further upside for equity markets, driven by an improvement in business confidence and a recovery in investment. Attractive valuations for stocks relative to high grade bonds should lead to outperformance over a six- to 12-month investment horizon.

8.23am GMT

The post-election rally has pushed the pound to its strongest point against the euro since the EU referendum.

One euro now buys 83p, the least in over three years, as the City welcomes the end of that 'political paralysis'.

EUR/GBP falls below post-2016 vote lows. New dawn for sterling? pic.twitter.com/1qtLFexBla

8.17am GMT

The pound has also risen in early trading.

Against the US dollar, sterling is up half a cent at $1.3375. It's also picked up against the euro, back over a1.20.

The British pound continues its rally after a decisive Tory election win https://t.co/Ug5xAoLi4T pic.twitter.com/c2dj2OcZK5

8.16am GMT

Holger Schmieding of German bank Berenberg has told clients that Boris Johnson's win ends the "political paralysis" in the UK - good news for the markets.

First, the political clarity will allow both sides to move on. That the key political question, Brexit or no Brexit, has now been settled unequivocally takes some of the venom out of the debate within the UK and between the UK and the EU27. That will leave more room for pragmatic compromises, especially on the UK side.

Second...Johnson's solid majority in parliament will allow him to sideline the Brexit hardliners in his Conservative Party and conclude a sensible free-trade deal with the EU and/or extend the transition period during which the UK stays in the single market and customs union beyond the end of 2020 if need be.

8.11am GMT

Britain's FTSE 100 index of blue-chip stocks has jumped by 58 points, or 0.8%, at the start of trading.

That takes the Footsie up to 7413 points, close to a two-week high.

8.04am GMT

China's stock market has risen by 0.5% this morning, as traders welcome news of the Phase One trade deal with the US.

But the big action is in Australia, which has posted its biggest one-day rise in seven months. The S&P/ASX 200 index gained 1.6% towards a record high, with mining stocks benefitting from trade optimism.

7.55am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Related: 'Amazing deal' or 'capitulation'? Why the US-China trade truce may not last

What the market needs now, though, is clarity around exactly what the deal entails. The longer we have to wait for this detail, the more likely market participants will start to question how good a deal it actually is."

Related: UK's biggest firms gain more than 30bn in value after Tory win

On Monday at 9.30am we will restate our March fiscal forecast for @ONS statistical changes. We will not incorporate any other new data, new judgements nor include an update to the economy forecast. pic.twitter.com/1MhPqHIspM

..the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies, a financial market stress, and an independent stress of misconduct costs. Overall, the stress is more severe than the financial crisis.