FTSE gains ground as financials rally

By Sudip Kar-Gupta
Reuters
People pass electronic information boards at the London Stock Exchange in the City of London
People pass electronic information boards at the London Stock Exchange in the City of London October 11, 2013. Shares in Britain's Royal Mail rocketed to a near 40 percent premium above their issue price in Friday's stock market debut, fuelling a debate about whether they had been priced too low in order to guarantee a successful privatisation. REUTERS/Stefan Wermuth (BRITAIN - Tags: POLITICS BUSINESS) - RTX147BD

By Sudip Kar-Gupta

LONDON (Reuters) - Britain's top equity index rose on Tuesday, with financial stocks outperforming, amid expectations of new economic stimulus measures from the European Central Bank.

The blue-chip FTSE 100 index closed up by 0.7 percent, or 47.51 points, at 6,822.76 points - its highest closing level since early July.

The London market was closed on Monday, so it spent Tuesday catching up with advances in Europe the day before. The rally was ignited by ECB President Mario Draghi, who raised expectations of new stimulus measures, such as quantitative easing, in a speech late on Friday.

Traders said that QE would boost banks because they can borrow at low rates from the central bank and then lend the money on at a slightly higher rate for a profit.

"If QE is on the way in Europe, it should help stock markets across the board," said Terry Torrison, managing director at McLaren Securities.

Copper miner Antofagasta missed out on the rally, falling 1.2 percent after it posted an 11.5 percent decline in first-half core profit.

The FTSE 100 peaked at 6,894.88 points in mid-May, its highest since December 1999. It has since given up much of those gains, but some traders said it looked set to rise soon. The FTSE 100 is up by 4.5 percent from a low hit more than two weeks ago after a sell-off triggered by conflict in Ukraine.

"The broader technical picture is now implying that upward momentum is such that further near-term gains have become a realistic expectation," said Bill McNamara, technical analyst at brokerage Charles Stanley.

(Additional reporting by Tricia Wright; Editing by Larry King)