Bank decision boosts market as the bankwagon rolls on
THE LARGE-CAP index closed higher yesterday, driven by strength from banks after the Bank of England (BoE) surprised markets by expanding its quantitive easing plan to £175bn. The FTSE 100 closed 43.40 points higher, or 0.9 per cent, at 4,690.53, after hitting a fresh 2009 intraday high of 4,729.58 following the BoE announcement.
The BoE extended its quantitative easing programme, raising the size of its bond purchase scheme to an unexpectedly large £175bn from £125bn, and held interest rates at 0.5 per cent.
Banks added the most points to the index, also helped by this week’s so far positive earnings news.
Lloyds Banking Group topped the FTSE 100 leaderboard, adding more than 12 per cent, followed by Royal Bank of Scotland, which gained nearly 10 per cent, with Barclays and HSBC up 5.2 per cent and 5.4 per cent respectively.
Within the financial sector, life insurer Aviva added 5.4 per cent after it posted stronger-than-expected first-half profit, helped by cost cuts, and said it planned a partial flotation of Dutch subsidiary Delta Lloyd to bolster its capital.
Standard Life, however, lost 2.1 per cent after Citigroup cut its rating to “hold” following weak numbers on Wednesday.
Non-life insurer RSA Insurance fell 2.5 per cent as a cautious outlook statement offset its better-than-expected first-half operating profit.
Thomson Reuters was also among the top large-cap risers, up 6.1 per cent, after the news and financial data publisher reported a better-than-expected quarterly profit, helped by cost cuts, and said it expected 2009 revenue to grow as the financial industry recovers.
Anglo-Dutch household products giant Unilever saw support after forecast-beating results, rising 5.4 per cent, as Numis repeated its “add” rating and suggested switching into the stock from Cadbury, as it had more favourable second-half momentum.
Miners were the biggest drag on the blue chips, tracking metal prices as investors paused to assess whether recent gains were justified given that economic recovery may not be as strong as prices indicated.
Antofagasta, Rio Tinto, Anglo American, Eurasian Natural Resources and Kazakhmys lost 1.1 to 3.8 per cent.
As US crude prices fell nearly $1 to around $71 a barrel on oversupply concerns, weakness was seen among oil stocks, with BG Group and BP dropping 0.1 per cent and 1 per cent respectively.