UK stocks bounced back today after the Federal Open Market Committee (FOMC) pledged to keep rates at near zero levels through 2014 following yesterday’s policy meeting.
Chairman of the Federal Reserve Ben Bernanke warned of “strong headwinds” coming from Europe and said the recovery is yet to enter a stronger phase.
The FTSE 100 stood at 5,782 in early afternoon, up 59 points (1.05 percent) from Wednesday’s close.
The dovish stance taken by the Fed raised a few eyebrows on both sides of the Atlantic as it followed a marked improvement in the US job market.
The latest monthly non-farm payrolls report from the Department of Labor showed that the US economy created 200,000 new jobs in December, while jobless claims fell to near four year lows last week.
“It’s been a 'risk on' start to trading firmly on the back of the FOMC pledge to strongly support the US economy through to 2014, which surprised some,” said chief market strategist at City Index Joshua Raymond.
“The sceptic in me would question what the Fed has seen to warrant a more aggressive accommodative stance, particularly considering recent US economic data has highlighted an improvement in US activity.”
Traders will have more employment data to digest today with the Department of Labor due to release its weekly jobless claims report later in the afternoon.
In Europe, Greece will resume talks with its private creditors today in hopes to hammer out a deal that would reduce its mountain of debt.
Prime Minister Lucas Papademos will hold a meeting with managing director of the Institute of International Finance Charles Dallara, which represents the private bondholders.
A bond swap agreement on terms acceptable to the debt ridden country’s official creditors including the EU and the International Monetary Fund (IMF) is key to securing a new bailout package and averting a disastrous default.
Greece doesn’t have much time to work with as it faces a March 20 deadline to repay a €14.4 billion bond.
Mining stocks flooded the FTSE 100 leaderboard as base metals rose on the back of the FOMC statement.
Kazakh copper miner Kazakhmys (LON:KAZ, up 5.8pct at 1,178p) was the top riser in the sector, followed by Vedanta Resources (LON:VED, up 5.6pct at 1,216p) and Xstrata (LON:XTA, up 4.5pct at 1,128p).
Shares in part-nationalised banks Lloyds (LON:LLOY, up 4.6pct at 32.35p) and RBS (LON:RBS, up 3.6pct at 27.71p) also were in demand in morning trade.
US markets
Financial bookmakers are currently expecting a higher start on Wall Street on the back of another batch of strong earnings reports.
Futures for the Dow Jones Industrial Average (DJIA) rose 56 points (0.45 percent) in premarket and futures for the broader S&P 500 index we4re up 5.5 points (0.4 percent).
Industrial machinery and equipment group Caterpillar (NYSE:CAT) reported a 58 percent jump in earnings to US$1.55 billion for the fourth quarter, up from US$968 million in the same period of 2010.
Media provider Netflix (NYSE:NFLX) also surprised on the upside with its fourth quarter net income reaching US$41 million. While 13 percent below the profit booked in the last three months of 2010, the figure was above market forecasts. Revenues jumped 47 percent to US$876 million.
On the macroeconomic front, investors will have new home sales data for December from the Commerce Department to digest today on top of the jobless claims report.
Analysts polled by FactSet expected to see an increase to an annualised rate of 320,000 in home sales, while a Bloomberg survey forecast a gain of 18,000 in initial jobless claims.
UK corporate news
Back in the UK, today’s news in the top flight included a strong set of production figures from copper miner Kazakhmys.
The group met its production targets for the fourth consecutive quarter, taking the total 2011 output to 301,000 tonnes of copper cathode. Kazakhmys expects to maintain similar levels of copper output in 2012.
Chief executive Oleg Novachuk noted that all of the group’s sales contracts for the coming year have been completed, which he said reflects continued strong demand for copper.
Fellow mining major Anglo American (LON:AAL, up 3.5pct at 2,752p) also released its production figures for 2011 today.
Anglo saw its iron ore production rise five percent to 12.4 million tonnes, which was due to initial production from the Kolomela mine and a continued improvement in performance at the Amapá project.
Kolomela, which has a production capacity of nine million tonnes per annum, was commissioned five months ahead of schedule.
The group expects to ramp up production at the mine to between four and five million tonnes this year.
Fellow blue chip BG Group (LON:BG., up 1pct at 1,470p) has agreed to buy an additional two million tonnes of liquefied natural gas (LNG) over a 20-year period from Cheniere Energy’s Sabine Pass terminal in Louisiana, USA.
Back in October, BG and Cheniere signed a sale and purchase agreement for 3.5 mtpa of LNG.
“The agreement adds further volume to our diversified global LNG supply portfolio and is underpinned by the recent material increases in US gas reserves as well as a favourable long-term outlook for global LNG demand,” said chief executive of BG Group Frank Chapman.