­­­FTSE rockets to pre-crisis level as investors bet on US recovery

BRITAIN’S top shares closed at their highest in nearly 29 months yesterday as investors responded bullishly to the US Federal Reserve’s decision to pump more cheap money into the economy to boost flagging growth.

Financial stocks, led by Man Group and mining and energy shares such as BHP Billiton and BP, surged higher as riskier assets around the world rose despite concerns the programme could do more harm than good.

The FTSE 100 closed up 113.82 points or two per cent at 5,862.79, its highest since 9 June 2008, after the Fed committed to buy $600bn in government bonds to support a struggling US economy on Wednesday.

“The market’s reacted positively to QE and there's a risk on environment, with data out of the US better, the concerns about a slowdown are less pronounced,” said Phil Poole, global head of macro investment strategy at HSBC Global Asset Management.

There was good economic news from the United States yesterday where non-farm productivity rose faster than expected in the third quarter, while unit labour costs fell.

New US claims for unemployment benefits rose more than expected last week, underlining the persistent weakness in the jobs market which is threatening the recovery.

Financial stocks were top gainers. The world’s largest listed hedge fund firm Man Group, up 14.6 per cent, reported upbeat first-half results.

Banks provided much of the index’s strength.

Miners rose in tandem with metals, which benefited as the dollar index fell to an 11-month low after the Fed’s announcement.

Anglo-Australian miner BHP Billiton rose 6.6 per cent after Canada blocked its $39bn bid for Potash Corp.

Energy shares were higher helped by a 1.7 per cent spike in the price of crude. BP added 1.3 per cent. The oil major beat profit forecasts on Tuesday.

Elsewhere, Unilever jumped 6.3 per cent after the consumer goods group’s third-quarter results.
On the downside, Wm Morrison Supermarkets fell 3.9 per cent after warning shoppers were likely to remain under pressure into the second half of 2011.

Next, which said it expected sluggish growth in the fourth quarter on Wednesday, shed 2.2 per cent, while Marks & Spencer, which reports next week, was 1.6 per cent lower.

Rolls-Royce slipped five percent after Qantas Airways suspended flights of its Airbus A380 fleet after engine failure triggered an emergency landing in Singapore. Qantas A380s use Rolls-Royce Trent 900 engines.

Experian fell one per cent as Credit Suisse downgraded the credit checking company.

The European Central Bank kept its main interest rate on hold at a record low of 1.0 per cent for the 18th month running yesterday, as expected by economists.

Momentum underlying the euro zone’s economic recovery remains positive but uncertainty about the outlook still prevails, Jean-Claude Trichet at the ECB said.