Wednesday, February 27 09:49:09
Britain's top share index rose in early trade today, rebounding from steep losses in the last session after the U.S. Federal Reserve's chairman defended stimulus programmes for the world's biggest economy.
Ben Bernanke strongly defended the U.S. central bank's monetary stimulus before Congress on Tuesday, easing worries about a possible early retreat by the Fed from bond purchases and helping U.S. stocks gain after market close in Europe.
Banks, which benefit the most from the liquidity that the Fed's quantitative easing programme provides, gained 1.1 percent, adding the most points to the index.
By 0809 GMT, the FTSE 100 index was up 19.47 points, or 0.3 percent, at 6,289.91, having lost 1.3 percent on Tuesday after an Italian election ended in stalemate.
The centre-left bloc secured a majority in the lower house but is unable to govern without a deal with either former prime minister Silvio Berlusconi, the man it blames for ruining Italy, or the anti-establishment 5-Star Movement.
Investors are watching an Italian debt auction this morning at which Italy is expected to pay the price for its latest political crisis in the form of higher borrowing costs.
"I definitely see there being continued uncertainty (over Italy), and the talks about forming a coalition are likely to be as messy as it was in Greece last year. The debt auction is important, as we've already seen the yields rise," Mike van Dulken, head of research at Accendo Markets, said.
"However, the bounce we've seen back to 6,300 (on the FTSE) shows that there always will be bargain hunters after such a big correction, and Bernanke helped, as did the Bank of England's comments."
Bank of England officials also reiterated their support on Tuesday for quantitative easing, a monetary policy tool whose effectiveness has been challenged in recent weeks.
Last week, the FTSE 100 saw its biggest fall since July - bigger than the fall after the Italian election - when minutes of the Federal Reserve said that its asset purchase programme may need to be wound down sooner rather than later.
"That easy money risk prop is a massive factor that has underpinned the rally we've seen since last year. People seem to be prepared to put their trust in easy money, and look through the risk," van Dulken added.
The index hovered around the 6,300 level but could not sustain a break above it. The level is important from a technical standpoint as it served as resistance at the start of the month, only to be a support level as February progressed.
Vodafone added the most points to the index, contributing 6 points to gains and rising 1.9 percent after reports that it had suspended plans to approach Kabel Deutschland about a takeover bid.
Also assisting the rise was Weir, which led FTSE gainers, rising 2 percent after it posted a forecast-beating 12 percent rise in profits in 2012, as strong demand for its pumps from mining companies offset a weaker performance in oil and gas.
However, its forward outlook was less positive.
"The outlook for 2013 is cautious with guidance for low single digit revenue growth and stable margins," Investec said in a note, putting its "Buy" recommendation under review. ( C) Reuters