By Shashank Nayar and Sagarika Jaisinghani
(Reuters) - London shares rose on Thursday as signs of progress in developing a COVID-19 vaccine bolstered hopes of a post-pandemic economic recovery, while Primark-owner Associated British Foods jumped after issuing an upbeat trading update.
The blue-chip FTSE 100 (FTSE) was up 0.9% and the mid-cap FTSE 250 (FTMC) 1.0% as a COVID-19 vaccine from Pfizer (N:PFE) and Germany's BioNTech (O:BNTX) was found to be well tolerated in early-stage human trials.
AB Foods (L:ABF) surged 6.5% to its highest in nearly a month, as it said trading in the Primark fashion stores that had reopened from a coronavirus-led lockdown had been "reassuring and encouraging".
"The recovery from the pandemic was never going to be easy for businesses, yet AB Foods' update would suggest it stands a good chance of bouncing back," said Russ Mould, investment director at AJ Bell.
Travel stocks (FTNMX5750) added 2.5% as a report said the British government will end quarantine rules for those arriving from 75 countries so that people can go on holiday.
The FTSE 100 has rebounded sharply since a coronavirus-driven crash in March, but is still down about 17% on the year with investors closely tracking reports of a resurgence in COVID-19 cases, which could lead to another shutdown.
"The risk now appears to be reversing previous action to ease lockdowns and go back to square zero. Any news of a vaccine being developed will only have a short-lived impact on markets until it becomes available to the entire population," said Hussein Sayed, market strategist at FXTM.
Pressure is also mounting on the UK to agree to a free trade deal with the European Union before the end of the year, when a transition period expires.
Among individual movers, engineering company Meggitt (L:MGGT) jumped 8.1% even as it estimated a roughly 15% drop in first-half organic sales.