By Barbara Kollmeyer
MADRID (MarketWatch) -- Stocks in London closed at their highest
level in two years Thursday 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 closed up 2% to 5,862.79, with banks and
mining groups in the lead.
The last time the FTSE 100 traded above 5,847 was June 2008. The
last time the index was above 5,800 generally was April of this
year.
U.K. markets joined 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. A rally for U.S.
stocks at the open kept the momentum going for London and Europe,
where indexes also rose strongly.
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 kept the stock of asset purchases financed by
the issuance of central bank reserves unchanged at £200
billion ($322 billion). The European Central Bank also maintained
rates on hold.
Corporate news was also a big driver for London stocks. Leading
the gainers, shares of Man Group rallied more than 14% 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 Unilever , up 6.3% after the
consumer-goods giant reported a 19% gain in third-quarter net
profit and higher volumes, especially in its emerging-markets
unit.
Mining stocks also played a big role in Thursday's rally. Shares
of BHP Billiton PLC (BHP) rose 6.6% 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," the analysts said in a
note.
Mining stocks also got a boost from surging commodity prices as
the dollar fell in reaction to the Fed move.
Shares of Xstrata PLC soared 7.1%, shares of Kazakhmys PLC
rallied 6.8% and Fresnillo PLC rose 5.7%.
On the downside in London, shares of Rolls-Royce Group PLC fell
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 4.1% in Paris.