LONDON MARKETS: FTSE 100 Rallies As Fed Keeps Interest Rates On Hold

By Sara Sjolin, MarketWatch

Miners and oil firms gain as dollar slips

U.K. stocks moved firmly higher on Thursday morning after the U.S. Federal Reserve kept interest rates at a near-record low, but hinted a hike could come in December.

The FTSE 100 index rose 1.3% to 6,923.03, setting it on track for a fourth straight gain.

The blue-chip benchmark on Wednesday eked out a small gain (http://www.marketwatch.com/story/ftse-100-climbs-with-bank-stocks-rising-after-boj-decision-2016-09-21). The move came as banks advanced (http://www.marketwatch.com/story/global-bank-shares-pop-up-as-bank-of-japan-aims-for-yield-curve-relief-2016-09-21) after the Bank of Japan kept its monetary policy ultra-accommodative and shifted focus to yield-curve control (http://www.marketwatch.com/story/bank-of-japan-keeps-rates-steady-tweaks-policy-framework-2016-09-21).

The Fed was the next central bank in the frame, releasing its decision after the European markets closed on Wednesday. Policy makers left the Fed's key interest rate unchanged (http://blogs.marketwatch.com/capitolreport/2016/09/21/live-blog-and-video-of-the-fed-decision-and-janet-yellen-press-conference-2/) at 0.25%-0.5% as they wait for more evidence of economic strength before tightening policy.

Read:In-N-Out sells out of burgers in London, hints at opening in U.K (http://www.marketwatch.com/story/in-n-out-sells-out-of-burgers-in-london-hints-at-opening-in-uk-2016-09-21).

"Fed Chair Janet Yellen's message of economic progress, but not enough to move this month, is being interpreted as a hawkish hold, prepping us for a December hike to keep excessive market complacency at bay," said Mike van Dulken and Henry Croft, analysts at Accendo Markets, in a note.

"There was nonetheless something for both the hawks and doves, providing the U.S. central bank with enough wiggle room to swerve a pre-Christmas hike if necessary," they added.

The Fed decision to stand pat on rates weakened the dollar, which in turn gave commodities a boost. Metals advanced across the board, while crude oil rallied almost 1%.

Oil prices also got a boost from data showing a drop in U.S. inventories and rumors that Iran and Saudi Arabia had met in Vienna ahead of the closely watched OPEC meeting in Algiers next week.

Among London-listed miners, shares of BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) rose 4.7%, Fresnillo PLC (FRES.LN) went up 3.7%, and Rio Tinto PLC (RIO) (RIO) (RIO) added 3.8%.

Oil companies were also higher. Shares of BP PLC (BP.LN) (BP.LN) gained 2.9%, and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) gained 2.3%.

Other movers: Shares of Rolls-Royce Holdings PLC (RR.LN) (RR.LN) swung between gains and losses, but were up 0.8% at the latest after the aerospace and defense appointed Daily Mail & General Trust PLC's (DMGT.LN) Chief Financial Officer Stephen Daintith to replace CFO David Smith (http://www.marketwatch.com/story/rolls-royce-names-daily-mails-daintith-as-cfo-2016-09-22).

Micro Focus International PLC (MCRO.LN) climbed 0.8% after the software company confirmed its full-year guidance (http://www.marketwatch.com/story/micro-focus-confirms-full-year-guidance-2016-09-22).

Economic news: The Bank of England's Financial Policy Committee warned the U.K. "faces a challenging period (http://www.wsj.com/articles/boe-warns-of-post-brexit-challenges-facing-u-k-economy-1474534896?mod=wsj_nview_latest) of uncertainty and adjustment", citing concerns over the vote to leave the European Union.

The FPC said a sharp fall in the commercial real-estate market coupled with the risk that foreign investors will ignore the U.K. post Brexit are among biggest risks to financial stability.

Separately, the Confederation of British Industry said its monthly survey of sentiment in the manufacturing sector rose to 22 in September (http://www.marketwatch.com/story/weak-pound-boosts-uk-manufacturing-cbi-says-2016-09-22) from 11 in August, indicated British manufacturers expect a rapid increase in output over the next three months. The optimism was in part due to a weaker sterling, which has boosted exports.

The pound traded at $1.3057, up from $1.3032 late Wednesday in New York.

(END) Dow Jones Newswires

September 22, 2016 07:39 ET (11:39 GMT)

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