STRONG corporate earnings hoisted Britain’s top shares by more than one per cent on yesterday, led by energy stocks after BP and BG Group results and ahead of the outcome of the eagerly awaited US Federal Reserve policy meeting.
At the two-day meet in Washington which started yesterday, the Fed will consider the prospect of further quantitative easing. Markets are pricing in a commitment to buy at least $500bn in Treasury debt over the coming months to spur a flagging economy.
The FTSE 100 closed up 62.81 points, or 1.1 per cent, at 5,757.43. The index has risen 1.4 per cent this week ahead of the Fed meeting.
“(Equities) are well placed. Yields on equities are very high and not just dividend but earnings yields as well,” said Mark Slater, chief investment officer of Slater Investments.
“If you invert the price earnings of your average FTSE 100 company you are getting somewhere between an 8 and 10 per cent earnings yield, you’re not going to get that on a prime property or any kind of bond and you have got some protection against inflation.”
Energy stocks added the most points to the index after strong earnings from BP, up 1.8 per cent, and BG Group up 3.4 per cent.
Oil explorer Tullow Oil climbed 4.1 per cent, helped by crude rising as the dollar sagged on QE hopes.
Miners, which were higher on Monday after stronger-than-expected Chinese manufacturing data, were in demand once again as a weaker dollar supported metals prices.
Antofagasta put on 3.2 per cent, with the Chilean copper miner due to report production figures tomorrow. BHP Billiton added 1.9 per cent with traders citing market talk that its bid for Potash had been rejected.