BRITAIN’S top shares rose 0.5 per cent yesterday, led by banks and echoing gains on Wall Street as US Federal Reserve chairman Ben Bernanke assuaged fears of an earlier than expected interest rate rise.
The FTSE 100 ended 27.83 points higher at 5,342.92 buoyed by the Fed chairman’s statement and after it had closed 0.7 per cent lower the previous session.
Bernanke began delivering his congressional testimony to the House of Representatives and the Senate yesterday. He started by telling lawmakers that he stood prepared to continue supporting the economy with extraordinary stimulus for some time.
“Bernanke has dismissed any fears that a vital cog in the economic global recovery mechanism will be taken away prematurely and that has boosted the confidence of investors,” said Jimmy Yates, head of equities at CMC Markets.
The news immediately saw US markets rally where the Dow Jones industrial average and the Standard & Poor’s 500 Index added 0.8 and 0.9 per cent respectively.
Banks were the biggest gainers on the FTSE 100 as investors tucked in ahead of results from Royal Bank of Scotland (RBS) on Thursday and Lloyds Banking Group on Friday.
RBS and Lloyds added 0.4 and 3.4 per cent respectively.
The UK government has approved RBS’s planned bonus pool, a move the bank’s executives hope will draw a line under the pay debate and help efforts to turn around its investment bank.
HSBC rose 2.5 per cent and Standard Chartered gained 1.2 per cent.
Barclays, which beat full-year pretax profit forecasts last week, fell 0.6 per cent as it traded ex-dividend.
Energy stocks were also a support for the index as crude prices rose more almost $1 to over $79 per barrel as the dollar weakened against the euro.
BP, Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy gained 0.3-1.2 per cent.
Miners were a drag on the index as some uncertainty over the potential impact of China’s monetary tightening remained, with Vedanta Resources, Xstrata, Rio Tinto and Kazakhmys losing 0.5-1.2 per cent.
The sector was unsettled by news that major commodity consumer China could implement fresh measures to clamp down on excessive bank lending to temper its growth spurt.
Wolseley was the biggest faller on the index, retreating 3.1 per cent after sharp gains the previous session after the building materials supplier issued a surprise, upbeat trading statement.
Land Securities and Reckitt Benckiser dropped 1.2 and 1.5 per cent respectively after
losing their dividend attractions.
Sales of newly built US single-family homes fell to a record low in January, according to data that hinted at potential trouble for the fragile housing market recovery.