FTSE edges up as ECB’s Draghi helps lift mood

BRITAIN’S top share index finished higher for a second straight session yesterday, with soothing comments from central banks reassuring investors that the accommodative monetary policies would stay longer.

The European Central Bank President Mario Draghi reiterated that an exit from the central bank’s exceptional monetary policy measures remains distant, while China’s central bank pledged to prevent a credit crunch.

The FTSE 100 index ended 63.57 points, or one per cent, higher at 6,165.48.

It rebounded after falling 12 per cent from a 13-year peak in late May to a seven-month low on Monday on concerns a recovery in the US economy might prompt the US Federal Reserve to trim its stimulus sooner than expected.

Analysts said the market remained vulnerable to sell-offs and investors should trade cautiously ahead of the European summer holiday period, which often proves to be volatile because of lower trading volumes.

“Central bank jaw boning, coupled with end-quarter massaging, is driving stocks,” Jeremy Batstone-Carr, head of private client research at Charles Stanley, said. “But markets are nervous, sentiment is brittle and this mini revival has a whiff of dead cat about it.”

Charts also showed that recent falls in equities had done some damage to the FTSE 100’s uptrend structure and any recoveries could just be a short-term bounce.

“Rallies are going to prove unsustainable. If we are going to resume a long-term bull cycle, we have to rebuild at these lower levels and that could happen over the summer months,” Cliff Green, an independent technical analyst, said.

Gerard Lane, equity strategist at Shore Capital, said the market was recovering from a deeply oversold position and added that equities needed to ease further to become cheap.

Among sectoral movers, banks were the top gainers on expectations the continuation of an easy monetary policy in Europe will help the sector. The FTSE banking index rose 1.4 per cent, while HSBC was one per cent stronger.

Aberdeen Asset Management rose 4.7 per cent to top the gainers’ lost on the FTSE 100, with analysts saying that the index was bouncing back on technical reason after sharply falling in the past sessions.

However, miners slipped on a sharp drop in precious metals prices. The UK mining index fell one per cent, while gold miner Anglo American dropped 3.3 per cent.