BRITAIN’S benchmark share index posted its biggest daily gain in two weeks yesterday, as expectations of looser US monetary policy and brighter German data gave investors fresh reason to push the market towards a retest of recent eight-month highs.
The FTSE 100 closed up 47.81 points, or 0.8 per cent, at 5,902.70.
A surprise improvement in German business sentiment this month, as signaled by the Ifo index, reassured investors after a run of gloomy global data.
Markets got a fresh boost mid-session, when expectations of more quantitative easing (QE) from the United States were fanned by Federal Reserve Chairman Ben Bernanke, who signalled concern about the strength of economic growth and made no mention of inflation risks.
Bill Gross, who runs the world’s biggest bond fund at Pimco, said the Fed might hint in April that it would embark on a third round of bond purchases.
“People had begun to get a bit worried over whether QE was going to continue and now it seems Bernanke is refreshing his dovish credentials and reminding people that it could still happen,” Keith Wade, strategist at fund manager Schroders, said.
“We are still reasonably positive on equities, valuations wise they still look quite attractive ... It [the prospect of QE] will hold down bond yields and continue to push people into equities as they are searching for yields.”
The FTSE bounced from its 50-day moving average around 5,856.29 and extended gains through 40, 30 and 20-day lines as it recovered poise after its biggest weekly sell-off in three months.
Before last week’s fall, the FTSE, which is up 5.9 per cent since the start of 2012, had climbed as high as 5,989.07, a level last seen in July and technical analysts said a re-test of those peaks could be on the cards in coming days.
US-focused companies were among the top performers. Wolseley, which earns around 40 per cent of revenue in the United States, rose 2.2 per cent. Its US exposure earned the builder a mention as a top pick in Europe by JP Morgan, along with Balfour Beatty, which added 1.4 per cent.
“We are constructive on a six- to 12-months’ view as we find US recovery to be broadening beyond just manufacturing, both developed and emerging market policymakers are by and large equity friendly, despite key China risk,” its strategists said in a research note. “We ... stay in ‘buying the dips’ mode.”
Renewed investor appetite for equities helped Aberdeen Asset Management lure in £1.4bn of new money in the first two months of the year, boosting its stock 4.4 per cent to 261 pence.
“We put our estimates under review, upgrade our target price to 270 pence and reiterate ‘buy’. Aberdeen remains our preferred stock in the asset manager space,” Investec said in a note.
The brighter prospects for the global economy – not least through expectations of growth-stimulating moves from the Fed – boosted oil prices, propelling Britain’s heavyweight energy companies higher. The sector added 1.6 per cent, also getting a boost from news of fresh discoveries.
BG Group rose 1.8 per cent, after unveiling its fourth Tanzanian gas discovery from the Jodari-1 exploration well, while Tullow Oil added 6.6 per cent, making it top FTSE 100 gainer, after finding oil in Kenya.