By Susan Mathew
(Reuters) - London shares rose on Tuesday as Prime Minister Boris Johnson took more steps to relax the country's coronavirus lockdown, while a smaller than expected decline in Britain's private sector raised hopes for the economy's recovery from a pandemic-induced slump.
The blue-chip FTSE 100 <.FTSE> closed up 1.2%, boosted by financial, energy and mining stocks. The mid-cap FTSE 250 <.FTMC> ended 0.5% higher, but cut some session gains as home builders weighed.
The moves were in-line with global markets which cheered confirmation that the U.S.-China trade pact was "fully intact", after earlier confusing statements from the White House. Declining pace of contraction in U.S. business activity and similar data from the euro zone further bolstered sentiment.
In the next stage of relaxing a nationwide shutdown, pubs, restaurants and hotels can reopen in England early next month, with a rule on social distancing reduced from two metres to one metre-plus, PM Johnson said.
The economy has already started to reflect benefits of easing lockdowns and is set to return to growth from next month IHS Markit/CIPS flash composite PMI showed. The index, which measures activity in the services sector and manufacturing, jumped to 47.6 in June from 30.0 in May.
But the data point masks a much slower recovery, warned James Smith, developed markets economist at ING.
"Judging by other measures of activity, we suspect the size of the UK economy will still be 15-20% smaller at the end of the second quarter than it was pre-virus. We don't expect a full recovery until 2022 at the earliest."
A raft of global stimulus and the easing of coronavirus-induced lockdowns have powered the FTSE 100 following its crash to an eight-year low in March, with the export-heavy index now only down about 16% on the year.
Among individual stocks, Hikma Pharmaceuticals <HIK.L> slumped 5.6% on news that Boehringer Ingelheim, a major shareholder in the drugmaker, was selling most of its nearly 1-billion-pound stake.
(Reporting by Shashank Nayar and Sagarika Jaisinghani in Bengaluru; editing by Uttaresh.V and Jane Merriman)