FTSE rallies on Fed's decision to maintain stimulus

Reuters

By Alistair Smout

LONDON (Reuters) - Britain's top share index climbed on Thursday, with the U.S. central bank's decision to delay a reduction in its monetary stimulus boosting investors' appetite for risk-sensitive sectors such as miners.

The FTSE 100 index tracked a rally in global equities after the U.S. Federal Reserve surprised markets late on Wednesday by saying it wanted to wait for more evidence of solid economic growth before trimming its bond purchases, which have helped equity markets across the globe to set new highs.

The blue chip British stock index closed up 66.57 points, or 1 percent, at 6,625.39.

The mining sector gained 2.2 percent, led higher by precious metal miners.

Randgold Resources and Fresnillo were among top gainers, up 8.1 percent and 6.1 percent respectively, benefiting as gold traded near a one-week high. Gold is seen as an inflation hedge, and had suffered as expectations grew that the Fed would begin to wind down its stimulus package.

"The Fed are trying to keep real rates as low as possible, therefore we see a spike in precious metals... and it's London listed gold miners that are helping the FTSE today," Jeremy Batstone-Carr, analyst at Charles Stanley, said.

UK miners dominated the list of top gainers not just on the FTSE 100 but also the pan-European FTSEurofirst 300, and the sector helped British stocks outperform their European peers.

The FTSE 100 is up nearly 12.5 percent this year, but remains 3 percent off of 13-year highs set in May, just before Fed Chairman Ben Bernanke first indicated that tapering was set to occur later in the year.

A small majority of analysts polled by Reuters believe tapering is still set to occur later this year, in December.

"I think they've chosen the path of least regret... it's very unlikely that in 6 months time the Fed will regret having waited a few more months to do tapering," Garry Evans, global head of equity strategy at HSBC, said.

" had they done it now, it's possible that they'd have looked back and thought that it was the wrong thing to do."

(Editing by Hugh Lawson)

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