BRITAIN’S FTSE 100 rose yesterday, with miners cheered by a string of solid output numbers from the likes of BHP Billiton, and with the US Federal Reserve reassuring that stimulus will only be cut if the economy is strong.
Fed chairman Ben Bernanke signalled plans to start scaling back bond purchases this year could be altered if the economic outlook deteriorates.
The comments offered the biggest boost to bank stocks, which have the most direct access to the extra central bank liquidity. The sector – which also benefited from positive sentiment after strong profits at Bank of America – provided the biggest boost to the FTSE 100, of some 6.8 points.
Miners came second, after BHP notched up a robust rise in iron ore output, following on from a solid update from rival Rio Tinto, and sending its shares up two per cent.
The production numbers eased concerns about the outlook of the sector, which has been the clear laggard this year amid slowing growth in top market China and falling metal prices.
“It’s where people are expecting bad news it might not be quite as bad. We've already had Billiton and Rio come out with production numbers which aren’t too bad and, because they are so bashed up, they are doing OK,” said Andy Ash, head of sales at Monument Securities.
Miners have the lowest earnings expectations of all the sectors, with StarMine SmartEstimates forecasting a 23.6 per cent drop this year, setting the bar low for any positive surprises.
Thanks to the gains in the miners and the banks – two of its three biggest sectors – the FTSE 100 closed up 15.58 points, or 0.2 per cent, at 6,571.93 points, nearing six-week highs and recovering from an early dip on Bank of England minutes.
The minutes showed policymakers unanimously voted against expanding the BoE’s asset-buying programme.
However, analysts said the vote could be seen as a truce for the debut of new governor Mark Carney, and further quantitative easing stimulus could still follow in coming months.
“We hold the view that we will have a restart of QE in the UK and FTSE should benefit as a result because sterling should come under pressure,” said Kokou Agbo-Bloua, of BNP Paribas.
A survey of clients by Barclays Stockbrokers chimed with the upbeat view on the FTSE’s medium term outlook, with 70 per cent saying it is well positioned for a recovery.