Footsie treads water as QE2 looms

LONDON FTSE 100 CLOSE 5,748.97 -8.46

London share prices reflected apprehension yesterday as the clock ticked down to a key decision by the US Federal Reserve on how it plans to stimulate a recovery in the world's biggest economy.

The benchmark FTSE 100 index closed eight points lower at 5,748.97 after darting between positive and negative territory. Investors were waiting to discover exactly how far the Fed was prepared to go with its second bout of quantitative easing.

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Expectations of further money printing across the Atlantic weakened the dollar and saw the pound up against the greenback at $1.60.

Spreadex analyst Phil Gillett said: "Sluggish day in the markets as we await news from the Federal open market committee. This really is a last chance saloon for the US economy. QE1 of $1.5 trillion failed to have the desired effect. What is to say smaller QE2 will have any impact?

"It may well create inflation, which the States doesn't seem opposed to, and devalue the dollar through the back door."

Traders were cheered, however, by Lloyds Banking Group's success in securing Santander UK boss Antonio Horta-Osorio as its new chief executive.

The part-nationalised player was at the top of the risers board in a bounce back from Tuesday's wary reaction to the bank's third-quarter update.

Lloyds shares were up 3 per cent or 1.8p at 69.2p, as Horta- Osorio's appointment to succeed outgoing boss Eric Daniels was seen as a coup for the group.

The highly rated UK chief executive of Santander will join taxpayer-backed Lloyds on 10 January before taking on the post on 1 March.

Insurance group Admiral was just behind Lloyds in the top flight after a 28 per cent hike in vehicle numbers and an increase in premium rates led to a 50 per cent-plus jump in third-quarter turnover. With Admiral on track to meet profit forecasts, its shares jumped 43p to 1,670p.

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Edinburgh-based life and pensions firm Standard Life lost earlier gains, down 1.8p to 227.2p, despite posting a solid rise in new business in the first nine months of the year.

Next shares slumped 2 per cent after the retailer warned of price rises at the upper end of its expectations and said it may not maintain overall sales growth at the higher end of its zero to 3 per cent guidance. Next shares fell 49p to 2,180p.

Marks & Spencer shed 1.9 per cent or 8p to 419.5p, pressured as analysts at Royal Bank of Scotland repeated their "sell" rating on the stock.

Tesco, Morrisons and Sainsbury's dropped between 0.6 and 1.8 per cent.

Defence firm Cobham was the biggest faller in the top flight, down 22.3p or 9 per cent to 211.5p, after it signalled that growth in 2010 may not be as strong as hoped.

In the FTSE 250, kitchen and bathroom unit supplier Howden Joinery roared 14 per cent ahead on a full-year profits upgrade. It thanked a strong performance in its key October trading period, although it remains cautious on its outlook for 2011.The Shares raced up 10.5p to 90p.

Back in the top flight, BP performed strongly, gaining 1.8 per cent to 439.3p, after Goldman Sachs upgraded the oil major to "buy" from "neutral" on the basis of strong third-quarter results.