Share index up as Bank of England keeps rates at a low

BRITAIN&rsquo;S top share index closed 0.4 per cent up yesterday, with energy stocks lifted by optimism on the economic outlook as central banks kept rates steady and US data surprised on the upside.<br /><br />The Bank of England kept rates steady at a record low of 0.5 per cent and said it would expand its quantitative easing programme by &pound;25bn to boost Britain&rsquo;s recession hit economy.<br /><br />The European Central Bank also kept rates steady.<br /><br />The FTSE 100 closed up 17.75 points at 5,125.64 after gaining 1.4 per cent the previous session, shaking off early weakness and tracking gains on Wall Street.<br /><br />US data showed a steep rise in productivity and a fall in applications for job insurance while stronger-than-forecast results from Cisco Systems also lifted the mood.<br /><br />Energy stocks were the biggest support for the British index, as crude held above $80 per barrel. <strong>BG Group, BP, Royal Dutch Shell</strong> and <strong>Tullow</strong> <strong>Oil</strong> added 0.3-1.9 per cent.<br /><br />British data also boosted sentiment, after manufacturing output rose faster than expected in September.<br /><br />&ldquo;All the data this week has been pretty good in the US and the UK, so I think the correction we&rsquo;ve seen recently is over and markets should keep moving back up over the next couple of weeks,&rdquo; said Graham Secker, UK equity strategist at Morgan Stanley.<br /><br />The BoE said indicators such as spending and confidence suggested a pickup in economic activity may soon be evident.<br /><br />It also said the considerable stimulus from the past was still working through the economy. <br /><br />Britain&rsquo;s economy contracted in the third quarter, making the current recession the longest since records began more than 50 years ago.<br /><br />Food retailers <strong>Tesco</strong>, <strong>J Sainsbury</strong> and <strong>Wm</strong> <strong>Morrison</strong> added 0.3-2.4 per cent, helped by speculation Dutch grocer Ahold may be about to hit the acquisition trail, or could become a target itself. The sector was also lifted by positive results from Delhaize. <br /><br /><strong>BT Group </strong>added 2.5 per cent and <strong>Vodafone</strong> rose 1.1 per cent, helped by results from Deutsche Telekom which showed good growth from its mobile business.<br /><br /><strong>Rentokil</strong> <strong>Initial</strong> was also among the firmest gainers, up 2.9 per cent after BofA-Merrill Lynch added the support services group to its business services sector &ldquo;most preferred list&rdquo;.<br /><br />The banking sector was the main drag on the index, with nervousness nagging stocks after a shake-up in the sector earlier in the week.