Stocks in London were on the rise this afternoon after the Bank of England decided to inject a further £50 billion into the UK economy to avert a recession.
The FTSE 100 stood at 5,887 in early afternoon, up 12 points (0.2 percent) from Wednesday’s close.
Today’s announcement takes the central bank’s quantitative easing programme, which was launched in 2009, to £325 billion.
The move by BoE was triggered by a contraction of the UK economy, which shrank 0.2 percent in the final quarter of 2011. The UK will technically be in a recession if the GDP falls against in the first three months of this year, marking a second consecutive quarter of contraction.
The bank’s monetary policy committee said the expansion of the QE programme would ensure that inflation does not undershoot its two percent target, adding that the near-term economic outlook remains weak.
“Thus, going forward the prospect of more QE will depend on the tussle between stronger growth on the one hand but downside inflation risks on the other,” said analyst at forex.com Kathleen Brooks.
“But on balance I would argue that the Committee is taking a cautious approach to QE and the future trajectory of BOE asset purchases remains far from certain.”
Stock in Europe and the US received more help from today’s jobs data released by the US Department of Labor.
The figures revealed a surprising drop of 15,000 in the number of initial applications for unemployment benefits to 358,000 in the week to February 4 in yet another sign that the job market recovery in the US is picking up speed.
Today’s decision by the Bank of England lifted demand for shares in part-nationalised banks Lloyds (LON:LLOY, up 3.3pct at 36.95p) and Royal Bank of Scotland (LON:RBS, up 2.9pct at 29.68p) led the charge.
The banks were atop the leaderboard, followed by oil and gas engineering firm Amec (LON:AMEC, up 2.4pct at 1,097p).
BG Group (LON:BG., up 2.2pct at 1,478p) also did well after releasing a strong set of full year results and saying that it expects LNG demand to remain strong.
Other oil and gas majors including Tullow Oil (LON:TLW, up 2.2pct at 1,516p) rose as oil prices added more than US$1 per barrel.
Meanwhile, the heaviest fallers in the top flight included Tate & Lyle (LON:TATE, down 3pct at 674p). The food processing firm slid to the bottom of the FTSE 100 pile as said its “strong” first half income from co-products reverted to “more normal levels”.
The quarterly report from property group British Land (LON:BLND, down 2.9pct at 493.5p) and final results from engine and turbine manufacturing Rolls-Royce (LON:RR., down 2.2pct at 768p) also disappointed.
US markets
Financial bookmakers are currently expecting US stocks to edge up when trading kicks off on Wall Street today.
Futures for the Dow Jones Industrial Average (DJIA) climbed 41 points (0.3 percent) in pre market and futures for the broader S&P 500 index advanced 1.5 points (0.1 percent).
Apart from the jobless claims report, today’s US macroeconomic calendar also includes an update on wholesale inventories for December from the Department of Commerce with analysts expecting a small increase of up to 0.4 percent from the previous month.
On the corporate front, PepsiCo reported a four percent increase in net income to US$1.42 billion in the final quarter of 2011, translating into 89 cents per share, as revenues improved 11 percent to US$20.16 billion.
UK corporate news
Back in UK, other news in the top flight included an interim results report from financial services firm Hargreaves Lansdown (LON:HL., down 1pct at 455.2p). The group posted record revenues of £112.9 million in the final six months of 2011, up 16 percent from the same period of 2010.
Pre-tax profits jumped 21 percent to £72 million, allowing Hargreaves to raise its interim dividend 13 percent to 5.1 pence per share.
Fellow blue chip, beverage group Diageo (LON:DGE, up 0.5pct at 1,465p) called its first half performance “solid” as sales surged from £5.32 billion a year ago to £5.76 billion in the six months to end December, helping its profit to a 15 percent increase to £1.86 billion.
The increase in sales and profits, which came despite the uncertain economic environment, prompted the group to raise its interim dividend by seven percent to 16.6 pence per share.
The owner of the Guinness and Johnnie Walker brands said the strong first half performance put it in a position to withstand the consumer and economic trends it will face this year.
Elsewhere in the FTSE 100, Vodafone (LON:VOD, flat at 173.8p) reported a 2.3 percent decline in revenues to £11.6 billion in the final quarter of 2011, which was due to the impact of the euro zone debt crisis on its businesses in Spain, Italy and Greece.
UK revenues were up 1.1 percent to £1.27 billion as data revenues improved 13.2 percent primarily due to a higher penetration of smartphones, offsetting a reduction in non-contract call revenues.
In the mining sector, Rio Tinto (LON:RIO, down 1.2pct at 3,828p) posted a 59 percent decline in full year earnings due to a multibillion impairment charge, prompting two of its directors to turn down their annual bonuses.
The mining giant’s underlying earnings jumped 11 percent from 2010 to US$15.5 last year, however, net earnings plummeted to US$5.8 billion as a result of a US$8.9 billion charge related to a write-down of Rio’s aluminium business.
As a result, chief executive Tom Albanese and finance director Guy Elliott have decided to forgo their annual bonuses this year.