By Barbara Kollmeyer
MADRID (MarketWatch) -- Stocks in London rallied to highs not
seen in more than two years after the U.S. Federal Reserve
announced a new round of quantitative easing, and as investors
cheered earnings from Unilever PLC and Man Group PLC.
The FTSE 100 index rose 1.9% to 5,855.71, with banks and mining
groups taking the lead.
The last time the FTSE 100 traded over 5,847 was June 2008. The
last time the index was over 5,800 generally was April of this
year.
U.K. market gains were following a global equity rally triggered
after the U.S. Federal Reserve announced a $600 billion bond-buying
plan on Wednesday, in a bid to shore up the U.S. economy.
Meanwhile, the Bank of England, as expected, kept the official
bank rate on hold at 0.5%, where it has stood since March 2009.
The committee also made no move in its program of asset
purchases, keeping the stock of asset purchases financed by the
issuance of central bank reserves at £200 billion ($322
billion). The European Central Bank also maintained rates on
hold.
Corporate news was also a big factor in the action for London
stocks. Leading the gainers, shares of Man Group rallied over 10%
after the hedge-fund manager said funds under management at the end
of September were $40.5 billion, ahead of an earlier estimate of
$39.5 billion.
Also gaining were shares of conglomerate Unilever , up nearly 6%
after reporting a 19% gain in third-quarter net profit and volume
improvement, especially in its emerging-markets unit.
Mining stocks were playing a big role in Thursday's rally.
Shares of BHP Billiton PLC (BHP) rose 5% after the Canadian
government rejected its $38.6 billion bid for Potash Corp. of
Saskatchewan (POT)
"In our view, the outcome of the bid is becoming increasingly
more political, making the outcome less certain," said analysts at
UBS in a note to investors. They said if the deal is blocked, BHP
Billiton should claw back some of its 9% underperformance against
Rio Tinto PLC (RIO) since the bid was announced.
"Further to this, we would see potential for BHP to execute a
share buyback scheme of $10 billion, which would be 2.2% value
accretive; 3.7% EPS accretive for remaining shareholders," the
analysts said in a note.
Mining stocks were also gaining on the back of stronger
commodity prices as the dollar fell in reaction to the Fed
move.
Shares of Xstrata PLC advanced 4.7%, shares of Kazakhmys PLC
rallied 4.8% and Fresnillo PLC rose 4.3%.
On the downside in London, shares of Rolls-Royce Group PLC fell
4.5%. Australian-based Qantas Airlines Ltd. said it would suspend
all flights involving its Airbus A380 planes after engine failure
forced an emergency landing for one of those planes in
Singapore.
Rolls-Royce supplied the engines for the plane involved. Airbus
is owned by French aerospace and defense group EADS NV , whose
shares fell 3.3% in Paris.