- Stocks soar after last night's QE3 announcement
- Fed to buy mortgage debt, maintain Operation Twist
- Miners, banks surge early on
Stock markets across Europe surged in early trading on Friday following last night's stimulus announcement from the Federal Reserve; increased risk appetite was benefitting the mining and banking sectors the most early on.
The Footsie, up 1.4% in the opening hour at 5,900, hasn't closed about this level since March 26th when it finished at 5,903.
The Fed announced that, in order to bolster the economy and make sure that inflation stays close to its target, it would engage in a third round of quantitative easing (QE3) by buying more mortgage-backed securities at a pace of $40bn per month. It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.
The announcement last night prompted the Dow Jones Industrial Average to rise by 206.51 points to its highest level since late 2007, and the S&P 500
by 23.43 points to its highest closing point since December of the same year.
"After keeping the market guessing for months the Federal Reserve finally did what the markets hoped they would do several months ago, and gave the green light to further asset purchases," said senior market analyst Michael Hewson from CMC Markets. He said that the committee "decided to throw caution to the winds and dispense with worrying about appearing political, in the lead up to the US election."
In other news, Japan has cut its assessment for its economy, with the Cabinet Officer saying that the "recovery appears to be pausing due to deceleration of the world economy".
Meanwhile, Wolfgang Schaeuble, Germany's Finance Minister, has cautioned Spain against asking for further aid on top the €100bn for its financial sector: "I'm not in the camp that says 'take the money'," he said.
"I don't share the view of those who say Spain is so much a focus of speculation in the financial markets that we should advise the Spaniards to do anything different from what they're doing...I'm one of those who says we should do everything possible to convince the markets that this speculation against Spain is without any basis in reality, he said.
FTSE 100: Miners, banks give the Footsie a boost
Mining stocks were putting in an impressive performance as metals prices gained on a weaker dollar
after the Fed announcement. Investors are hoping that an improved US economy will boost the demand for commodities. Kazakhmys, Evraz, Fresnillo, ENRC, Vedanta, Antofagasta and Anglo American all gaining over 6%
Analyst Patrick Jones from Nomura said this morning: "The US Federal Reserve's announcement of further quantitative easing could provide support for commodity prices and the mining sector. During the 2010 QE2 rally, the copper spot price rose by ~50%, while copper equities doubled on average." The broker said it continues to favour higher quality copper miners over their higher beta peers.
Rio Tinto this morning welcomed Australia's decision to re-examine allowing third parties on a rail network in the Pilbara region which the miner believes could seriously affect its operations.
Royal Bank of Scotland (RBS), Barclays and Lloyds were also akin decent gains. RBS announced this morning that it is to launch an initial public offering (IPO) of its Direct Line Insurance Group, completing one of the conditions of its £45.5bn bailout from the government in late 2008.
InterContinental Hotels shareholders celebrated the news of the hotel group's special division, which will be 108.4p per share. The Holiday Inns group announced on August 7th that it planned to return $0.5bn of funds to shareholders via a special dividend tied to a share consolidation, plus another $0.5bn through a share buy-back programme, and it has now made good on that pledge.
FTSE 250: Chemring, Wetherspoons gains after updates
Defence contractor Chemring jumped after pushing back the deadline for The Carlyle Group to make an offer, after not receiving word the US asset management group.
Pubs group JD Wetherspoon was in demand after its new financial year has got off to a flying
start, helped by a strong performance during the Olympic and Paralympic Games.
Second-tier miners were following their blue-chip peers higher, with Aquarius Platinum, Ferrexpo, Talvivaara, Lonmin and Centamin on the up.
FTSE 100 - Risers
Kazakhmys (KAZ) 739.50p +8.75%
Evraz (EVR) 282.00p +8.71%
Fresnillo (FRES) 1,840.00p +8.04%
Eurasian Natural Resources Corp. (ENRC) 353.60p +7.97%
Vedanta Resources (VED) 1,038.00p +7.96%
Antofagasta (ANTO) 1,330.00p +7.52%
Anglo American (AAL) 2,026.50p +6.16%
Rio Tinto (RIO) 3,250.00p +5.57%
Glencore International (GLEN) 371.00p +5.01%
GKN (GKN) 239.80p +4.95%
FTSE 100 - Fallers
Diageo (DGE) 1,670.00p -1.15%
GlaxoSmithKline (GSK) 1,429.00p -0.73%
British Sky Broadcasting Group (BSY) 739.00p -0.67%
AstraZeneca (AZN) 2,894.50p -0.62%
Tate & Lyle (TATE) 644.00p -0.54%
British American Tobacco (BATS) 3,167.50p -0.46%
Associated British Foods (ABF) 1,282.00p -0.39%
Intertek Group (ITRK) 2,721.00p -0.29%
BT Group (BT.A) 236.20p -0.25%
Reckitt Benckiser Group (RB.) 3,626.00p -0.22%
FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 47.05p +14.48%
Ferrexpo (FXPO) 220.50p +12.50%
Petropavlovsk (POG) 408.90p +8.03%
Kenmare Resources (KMR) 42.70p +6.46%
Essar Energy (ESSR) 121.00p +5.49%
Fenner (FENR) 401.70p +5.29%
Hochschild Mining (HOC) 473.70p +5.27%
Centamin (DI) (CEY) 87.90p +5.27%
Talvivaara Mining Company (TALV) 165.00p +5.23%
Lonmin (LMI) 615.50p +5.12%
FTSE 250 - Fallers
RPS Group (RPS) 251.60p -1.26%
Stobart Group Ltd. (STOB) 115.19p -1.21%
Fidessa Group (FDSA) 1,467.00p -0.88%
BH Global Ltd. USD Shares (BHGU) 11.46 -0.78%
RIT Capital Partners (RCP) 1,180.00p -0.51%
BH Global Ltd. GBP
Shares (BHGG) 1,155.00p -0.43%
Phoenix Group Holdings (DI) (PHNX) 515.00p -0.39%
TR Property Inv Trust (TRY) 162.00p -0.31%
Synergy Health (SYR) 921.00p -0.27%
HICL Infrastructure Company Ltd (HICL) 122.50p -0.24%