BRITAIN’S top share index rose yesterday, extending its monthly winning streak to nine months, buoyed by assurances from US and European central banks that they would continue to pursue supportive monetary policy.
The blue-chip FTSE 100 index closed 34.93 points higher, up 0.6 per cent at 6,360.81, finishing up 1.3 per cent on the month and extending its longest monthly winning streak since 1997.
US Federal Reserve chairman Ben Bernanke sparked a rally on Wall Street for the second day in a row on Wednesday after he defended the Fed’s asset purchases programme to the House Committee in Congress. European Central Bank head Mario Draghi issued a similarly “dovish” set of comments.
Bernanke’s testimony to the Senate on Tuesday evening had helped British stocks add 0.9 per cent on Wednesday, recovering from sharp falls following a stalemate in Italian elections.
“It’s been good news for the bulls that the weakness we saw at the start of the week hasn’t lasted. We’ve seen some good data out of the US, and the doves are still clearly in control of the Fed,” Chris Beauchamp, market analyst at IG Index, said.
The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting some traction in the labor market recovery, and revised GDP figures showed that US growth was positive in the last quarter of last year.
“With the recent economic data being ahead of expectations and corporate data surprising to the upside, most of the dip buying we have seen has been led by long term investors,” said Atif Latif, director of trading at Guardian Stockbrokers.
“They still understand in the search for yield the equity market offers more upside than the negative real rate of return from the fixed income market.”
Year to date, the FTSE has gained 7.9 per cent, with total returns (including dividend payouts) of 8.4 per cent. However, foreign investors into British stocks have suffered at the hands of weakening pound, with sterling depreciating 6.7 per cent against the dollar this year.
Aiding gains was a 7.9 per cent rise in International Airlines Group (IAG), which topped the blue-chip leader board, after its 2012 operating loss of €68m came in better than consensus.
Banking stocks notched up solid gains on the central banks’ reaffirmation of a dovish stance. Royal Bank of Scotland was the notable exception after disappointing results from the part-nationalised lender. RBS shed 6.6 per cent, among the top FTSE 100 fallers, after the bank made a pretax loss of £5.2bn, hit by a £4.6bn charge for losses on the value of its own debt.