Bank of England's fiscal stimulus package propels London's rally

FTSE: 5,291.26 (+189.09) Mid-250: 9,888.56 (+320.75) Small Cap: 2,768.15 (+41.01):THE FTSE 100 continued to make progress yesterday, as fresh economic stimulus measures from the Bank of England sent the benchmark index higher.

It closed 3.7 per cent up at 5,291.26, a gain of 189 points, after the bank’s monetary policy committee expanded its quantitative easing programme by £75 billion to £275 billion. This was a bigger rise than the £50 billion expected and coming earlier than many analysts had thought.

“The fact that the mpc chose to act now on QE and to go for £75 billion rather than £50 billion reflects the fact that they believe an already difficult outlook for the economy has deteriorated amid mounting domestic and global head winds, notably including squeezed consumer purchasing power, slowing global growth, financial market turmoil and mounting concerns about the funding conditions facing banks as the euro zone sovereign debt crisis deepens,” said Howard Archer, chief UK and European economist at IHS Global Insight.

Michael Hewson, analyst at CMC Markets, sounded a note of caution: “It does suggest that the Bank of England is a lot more worried about the state of the UK economy than policy makers recent public bulletins would indicate. caught the markets on the hop with expectations that it would probably happen next month.

Resource stocks made the biggest overall contribution, with Antofagasta up 10.2 per cent at £10.42 and ENRC 9.7 per cent higher to 611½p. Vedanta Resources was 8.2 per cent higher at £11.13.

Financials also extended their gains, with insurers having another good session as Prudential took the FTSE 100 top spot, up 11.7 per cent to 590p.

Among the banks Barclays rose 8 per cent to 167.85p and Standard Chartered was 8.8 per cent stronger at £13.25, recovering from losses faced by stocks exposed to Asian markets and beset by worries about the outlook for growth there.

Among the mid-caps, oil explorer Exillon Energy gained 22.6 per cent to 216.23p after announcing a Siberian oil discovery.

Ferrexpo gained 10.5 per cent to 295p after well-received production numbers.

Overall, the FTSE 250 was 3.4 per cent higher at 9,888.56. – (Copyright The Financial Times Limited 2011)