The London market continued its rally on Thursday after the European Central Bank stepped up efforts to contain the continent’s government debt crisis.
While ECB president Jean-Claude Trichet failed to announce an increase in the pace at which the central bank buys government bonds, markets were lifted by news it would prolong measures to provide ready cash to banks and steady the financial system.
The FTSE 100 Index surged 2%, standing 125 points higher at 5767.6, when Mr Trichet said the bank would delay the exit from its emergency liquidity measures and would continue to offer unlimited loans to banks through the first quarter of next year.
Traders were encouraged by reports that British banks were financially supported by the US Federal Reserve during the financial crisis, with Barclays being among the biggest beneficiaries. The revelation of the scale of borrowing reinforced the role of the Fed as a last resort lender in the banking world.
The pound fell against the euro to 1.17, as the single currency fought back from losses sparked by the ECB’s silence over its bond-buying plans. Sterling was also down against the dollar, which had been lifted by strong retail and homes data.
Banking and mining stocks led the advance, with part-nationalised banks Lloyds and Royal Bank of Scotland up 2.5p at 66.5p and 1.6p at 41.6p respectively.
In corporate news, Thomson Holidays owner TUI Travel advanced more than 7% after its full-year results revealed an 11% increase in full-year operating profits. The travel firm made an underlying operating profit of £447 million in the year to September 30, up from £401 million the previous year. Shares were up 15.6p at 230p.
Outside the top flight, JJB Sports closed 1p lower at 4.7p, but did plunge 30% at one stage, after it revealed it expected to breach certain financial covenants on a £25 million Bank of Scotland loan after a deterioration in trading.
The sportswear retailer said sales continued to be below expectations and warned heavy snowfall and freezing temperatures sweeping the country could further hurt performance.
The biggest Footsie risers were GKN up 15p at 210.4p, TUI Travel ahead 15.6p at 230p, Kingfisher up 17.1p at 254.9p and Sage ahead 18p at 289p and the biggest fallers were Inmarsat down 5.5p at 644.5p, Resolution off 1.1p at 213.8p, Imperial Tobacco down 7p at 1874p and Morrison off 0.6p at 271.9p.