ILS of the European Central Bank’s move to begin quantitative easing pushed the FTSE to a six-week high yesterday. It was also helped by a rally in energy stocks on the back of stronger oil prices.
A programme by the European Central Bank for a year from March would amount to some €600bn, based on a rate of €50bn per month. If a similar plan ran until the end of 2016, it would surpass €1 trillion.
“The hours are being counted down to the ECB meeting. Apparent confirmation of the theory that QE is coming was enough to cause markets to rally,” Chris Beauchamp, analyst at IG, said. “The risk of such moves is that they increase the chance of disappointment.”
The market also got support from the minutes of the January meeting of the Bank of England showing two policymakers ditched their long-standing calls for an end to record-low interest rates in the face of tumbling inflation, prompting economists to again push back forecasts for a rate cut.
The benchmark FTSE 100 index rose for a fifth straight session and ended 1.6 per cent firmer at 6,728.04 points, the highest since early December.
The UK Oil and Gas index, up 2.8 per cent, led the market higher after energy companies tracked a rise of 1.9 per cent in oil prices. BP, BG Group and Royal Dutch Shell rose 2.2 to 4.3 per cent.
“We are witnessing a relief rally as stronger oil prices have prompted some people to build positions in energy stocks. Investors are also positioning ahead of tomorrow’s likely announcement of a bond-buying programme by the European Central Bank,” said Mike Jarman, chief strategist at H2O Markets.
Among the day’s sharpest movers, education and media group Pearson was the top FTSE 100 gainer, adding 4.9 per cent, after the group said it expected adjusted earnings per share of between 75 and 80p in 2015, up from the 66p it expects for last year.
Bluechip stock BT Group rose 1.7 per cent, outperforming the broader market. Traders cited a report in German Manager Magazine saying that Deutsche Telekom and BT were discussing partnerships between their enterprise businesses and in procurement.
Among big fallers was Sports Direct slipped 5.8 per cent after founder Mike Ashley cut his stake in the retailer cut his stake in the retailer to 55 per cent, while mid-cap oil producer Afren fell 18.6 per cent.