London Report: Fed pledge lifts FTSE as mining shares tick up

BRITAIN’S top share index climbed on yesterday, with the US Federal Reserve’s decision to delay a reduction in its monetary stimulus boosting investors’ appetite for risk-sensitive sectors such as miners.

The FTSE 100 index tracked a rally in global equities after the Fed surprised markets on Wednesday night by saying it wanted to wait for more evidence of solid economic growth before trimming its bond purchases, which have helped equity markets across the globe to set new highs.

The blue chip British stock index closed up 66.57 points, or one per cent, at 6,625.39. The mining sector gained 2.2 per cent, led higher by precious metal miners.

Randgold Resources and Fresnillo were among top gainers, up 8.1 per cent and 6.1 per cent respectively, benefiting as gold traded near a one-week high. Gold is seen as an inflation hedge, and had suffered as expectations grew that the Fed would begin to wind down its stimulus package.

“The Fed are trying to keep real rates as low as possible, therefore we see a spike in precious metals... and it’s London listed gold miners that helped the FTSE,” said Jeremy Batstone-Carr, an analyst at Charles Stanley.

UK miners dominated the list of top gainers not just on the FTSE 100 but also the pan-European FTSEurofirst 300, and the sector helped British stocks outperform their peers elsewhere in Europe.

The FTSE 100 is up nearly 12.5 per cent this year, but remains three per cent off of 13-year highs set in May, just before Fed chairman Ben Bernanke first indicated that tapering was set to occur later in the year.

A small majority of analysts polled by Reuters believe tapering is still set to occur later this year, in December.

“I think they’ve chosen the path of least regret... it’s very unlikely that in six months time the Fed will regret having waited a few more months to do tapering,” Garry Evans, global head of equity strategy at HSBC, said.

“Had they done it now, it’s possible that they’d have looked back and thought that it was the wrong thing to do,” Evans added.

Meanwhile, the FTSEurofirst 300 index of top European shares ended 0.6 per cent higher at 1,265.95 points, a level not seen since mid-2008, while the Eurozone’s blue-chip Euro Stoxx 50 index rose 0.9 per cent, to 2,936.20 points, a level not seen since mid-2011.

Germany’s Dax added 0.7 per cent, and France’s Cac 40 rose 0.9 per cent.