Federal Reserve fans Footsie flames

LONDON'S Footsie hit a five-month closing high yesterday after rumours that the United States Federal Reserve is planning to launch further money-boosting measures looked closer to becoming reality.

The FTSE 100 closed 85.76 points ahead at 5,747.35, close to its highest level this year in April, while the Dow Jones Industrial Average advanced 1 per cent in early trading.

The minutes of the most recent US Federal Reserve meeting encouraged investors, adding to expectations that policymakers will could make fresh moves to safeguard the American economic recovery.

Markets on both sides of the Atlantic were also helped on by strong quarterly results from JP Morgan and chipmaker Intel.

Figures from Intel on Tuesday night set the tone for the session after the computer chip maker beat forecasts on both income and revenue and allayed fears that the personal computer sector would struggle during the second half of the year. Spirits were further boosted by a 23 per cent rise in third quarter profits at JP Morgan as the Wall Street banking giant reported a decline in bad debts.

Talk surrounding further quantitative easing in the US weakened the dollar, and saw the pound move up against the greenback at $1.58. Sterling was down against the euro at €1.13.

The London banking sector was shaken earlier in the session after Standard Chartered surprised the market by launching a 3.3 billion investor cash-call.

The London-listed group wants to ensure it is well prepared for incoming Basel III rules, which will force banks to more than double the spare cash they hold to prevent a repeat of the financial crisis.

Standard Chartered dropped 2 per cent or 32.5p to 1,876p, while speculation that other banks may follow suit meant Barclays dropped 2.8p to 292p, although this was an improvement on earlier in the session.

Expectations for further asset-buying by the Fed put the dollar under pressure and sent gold close to recent record highs, at just over $1,360 an ounce.

Silver producer Fresnillo was one of the mining sector's strongest risers after a gain of 41p to 1,282p as its third-quarter trading update revealed silver production at a record level.

Fashion house Burberry was lower despite forecasting that full-year profits will be in the top half of City expectations.

The company said it continued to trade well, but analysts noted that sales growth was slightly lower in the second quarter compared with the first.It was top of the fallers board after shares dropped 31p to 1,008p following a recent strong run for the company.

Pub group Punch Taverns extended losses in the second tier, down a further 4 per cent or 3.2p to 76.9p in the wake of an 11 per cent plunge seen on Tuesday after its comments on trading prospects spooked investors.

Engineer Bodycote was enjoying a better session thanks to news its annual profits will come in towards the upper end of analyst forecasts. Shares rose 9 per cent or 25p to 301p.

Among the Scottish stocks, medical kit maker Omega Diagnostics jumped 16 per cent or 2.5p to close at 18p after an up-beat pre-close statement ahead of next month's interim results.