Markets: Talk of £50bn bond buy lifts stocks

BLUE-chip stocks received a fillip yesterday from growing hopes that the Bank of England (BoE) will spend up to another £50 billion in bond-buying from banks to get the economy moving.

Investor sentiment was improved by the announcement that the vote at the June meeting of the BoE’s monetary policy committee on a further round of so-called quantitative easing (QE) was on a knife-edge, at 5-4 against an immediate renewed burst of stimulus. However, that in turn followed a better-than-expected UK inflation figure of 2.8 per cent for May, and most economists now expect more QE next month.

The FTSE 100 index closed up 36 points at 5622.3, as the market was also helped by the Frankfurt and Paris bourses finishing up 0.5 and 0.3 per cent respectively. Mining and financial stocks were among the biggest risers. Polymetal International rose four per cent, or 33.5p, to 940p, while Hargreaves Lansdown Stockbrokers jumped five per cent, or 22.6p, to 518.5p. Royal Bank of Scotland closed up 1.8 per cent, or 4.3p, at 247.6p the day after making another 600 workers redundant.

In a quiet session for corporate news, ITV shares put on 2.3p to 76.5p, as investors continued to speculate about possible private equity interest in the broadcaster, and broker Panmure Gordon put out another “buy” rating on the stock.

Whitbread, owner of the Premier Inn hotels and Costa Coffee businesses, lifted another 92p to 2,059p on further positive City reflection on its strong trading update on Tuesday.

A number of stocks going ex-dividend – where new shareholders forfeit the right to the most recent pay-out – weighed on prices. Utility income stock Severn Trent was the biggest faller, 115p lower at 1634p, while United Utilities lost 13.5p to 656p.

Among second-tier stocks, Home Retail Group (HRG), owner of catalogue shopping group Argos and DIY chain Homebase, fell by five per cent, undoing some of its 24 per cent gains which came a day after a better-than-expected trading update was received. HRG’s shares were off 4.9p at 87p when stock market trading finished.