Global markets enjoy New Year rally, but pound drops on Brexit fears

London’s blue chip share index has joined stock markets worldwide in staging a new year rally thanks to economy-boosting moves in China, but the pound sunk lower on ongoing Brexit uncertainty.

Equities surged on the first day of trading after the People’s Bank of China pumped 115 billion US dollars (£87.6 billion) into the country’s financial system to help reignite economic growth.

The FTSE 100 Index closed 61.9 points higher at 7604.3 – a gain of 0.8% – while the Dax in Germany finished 1% ahead and France’s Cac 40 lifted 1.1% higher.

Across the Atlantic, the Dow Jones Industrial Average was nearly 190 points up at the time of close in London, with indices following Asia’s lead overnight after the Hang Seng Index jumped 1.3%.

But sterling was suffering a New Year hangover as investors looked to yet another year of Brexit talks taking centre stage.

The pound dropped 0.9% to 1.31 US dollars and was 0.4% down at 1.18 euros, with disappointing UK manufacturing survey data adding to pressure on sterling.

The closely-followed IHS Markit/CIPS Purchasing Managers’ Index (PMI) signalled the manufacturing sector shrunk at its fastest pace in almost seven-and-a-half years in December.

Connor Campbell, a financial analyst at Spreadex, said: “While the UK will be leaving the EU on January 31, the hard, more contentious, really important work is only just about to begin, as the two sides try to hash out their future trading relationship.

“A negotiation that has the deadline of December 31 – at least, that’s what Boris Johnson is chasing.”

Among equities, stocks were also being given a fillip by hopes of an end to the long-running US-China trade dispute after it was announced that a deal would be officially signed on January 15 following an agreement on phase one.

But market experts said investor attentions would now focus on phase two negotiations.

Top tier stocks benefiting the most amid Thursday’s rally included financials, with Barclays leading the sector’s gains with a 5.6p hike to 185.2p – a rise of 3%.

Elsewhere, Tullow Oil shares fell 7% in the FTSE 250 Index, down 4.3p to 59.7p, after the oil explorer revealed disappointing drilling results for its well off Guyana.

The group said it found oil, but that the reservoir it are drilling is smaller than first thought.

In early trading shares dropped by more than a fifth, before paring back losses.

The discovery comes after a tough year for Tullow, which saw its chief executive and exploration chief both quit after poor results from its offshore Guyana sites.

Videogame developer Team17 Group was enjoying better fortunes after it announced a deal to snap up rival Yippee Entertainment for £1.4 million.

The Yorkshire-based company behind the popular Worms series said the deal would allow it to increase studio capacity and gain access to a new talent pool in the North West of England.

Shares lifted 2% or 8.5p to 383.5p.

The biggest FTSE 100 risers were Tui up 37.4p to 991.2p, Barclays ahead 5.6p to 185.2p, Antofagasta 28.2p higher at 945p and M&G 6.6p stronger at 243.8p.

The biggest FTSE 100 fallers were British Land down 10.6p to 628.2p, Ocado off 19.5p to 1259.5p, Next 60p lower at 6958p and NMC Health 13.5p weaker at 1753.5p.