Friday, September 14 09:43:34
Commodity stocks and banking shares led Britain's blue chip share index higher today, after the U.S. Federal Reserve announced it would pump $40 billion a month extra into the world's biggest economy to help boost flagging growth. By 0725 GMT, the FTSE 100 was up 70.55 points, or 1.2 percent, at 5,890.47, extending a three-month rally after the Fed's declaration it would pursue an aggressively expansionary policy until the economy improved.
That drove copper prices higher, boosting London's influential mining companies, although many players were sceptical if the Fed moves would work, noting that inflated commodity prices could eventually weigh on growth. "I'm long stocks, gold, short U.S. dollars for the next 24-48 hours but (this) could be the day where FED did too much," Steen Jakobsen, Chief Investment officer at Saxo Bank, said. "Low yield and monetary policy stopped having an impact two years ago, but this could be the (moment) where really low rates no longer impact stocks and risky assets. The only cheap asset right now is money, every time this has been the case in history it has ended in bubble and tears," he said.
Evraz was the top performing miner, up 11 percent, while Lonmin gained 5.8 percent after it offered to raise the basic salary of entry-level workers in South Africa to around 5,500 rand, below the 12,500 rand demanded by wildcat strikers, the National Union of Mineworkers (NUM) said today. The Fed's announcement also lowered yields in debt-ridden euro zone countries such as Italy and Spain, reducing the threat of a default that the euro zone as a whole would struggle to swallow. Lower borrowing costs within Europe and attempts to stimulate economic activity is a boost for banks and other financial sector firms , which are heavily exposed to both areas.
Among individual risers, Royal Bank of Scotland added 4.4 percent after it confirmed plans to push ahead with a flotation of its Direct Line insurance division in what could be the biggest listing on the London Stock Exchange for more than a year. The top fallers on the FTSE 100 were defensive stocks, which tend to perform better than miners and financials in a riskier economic climate as their produce is essential for consumers and the stocks are used as a hedge against a murky macro backdrop. Drinks firm Diageo fell 1.4 percent, food producer AB Foods was 0.9 percent lower and British American Tobacco shed 0.8 percent. ( C) Reuters