The rebound for London shares continued today after China’s first cut in interest rates in four years triggered a surge for mining shares.
Fresh from a 2% jump on Wednesday amid optimism that Europe will offer support to Spain’s banking sector, the FTSE 100 Index leapt by as much as 100 points after Beijing’s quarter point rates cut boosted global demand hopes.
However, the rally was tempered by US Federal Reserve chairman Ben Bernanke, whose failure to hint at further stimulus measures during a testimony before US Congress caused the top flight to pare gains and close up 63.7 points at 5447.8.
The Bank of England also kept the City guessing over more quantitative easing after opting to keep its programme unchanged at £325bn (€400bn).
This was seen as good news for the pound, given fears that the UK’s return to recession and recent run of poor updates may prompt immediate emergency support.
Sterling was up against the US dollar and euro – at 1.55 and 1.24 respectively.
The latest no-change decision on Threadneedle Street came in the wake of better-than-expected figures from the powerhouse services sector.
Sentiment was earlier helped by the passing of a key test in Spain as a bond auction attracted strong demand, albeit at a rate higher than in April.
Comments from Chancellor George Osborne also fuelled expectations that the eurozone will come up up with a plan to stabilise the country’s banks.
Banks were cheered by the developments in Spain, with Lloyds Banking Group up 0.95p to 28p, Barclays ahead 5.05p to 192.85p and Royal Bank of Scotland 11.2p higher at 224.4p.
With the commodity sector given a lift on hopes that China is now focused on growth rather than rising inflation, Rio Tinto improved 115.5p at 3015p and Xstrata added 28.2p to 966.8p.
Elsewhere in the top flight, Johnson Matthey was nearly 5% higher after it capped a 58% jump in full-year profits to £409.3m by awarding investors a special dividend worth £212m, or £1 a share.
The blue-chip company, which specialises in catalysts, precious metals, fine chemicals and process technology, rose 107p to 2304p.
It was joined on the FTSE 100 risers board by luxury goods group Burberry, which climbed 68p to 1392p in the wake of an upgrade from Credit Suisse.
The broker raised its price target to 1650p from 1420p and said the retailer was well-equipped to find its way through the economic uncertainty.
Further signs of resilience in the property market after the Halifax reported slight growth in UK prices cheered housebuilders in the FTSE 250 Index.
Barratt Developments added 7.2p to 127.8p, Bovis Homes rose 19.5p to 422.5p and Persimmon lifted 33.5p to 586.5p, a rise of 6%.
The biggest FTSE 100 Index risers were Royal Bank of Scotland up 11.2p at 224.4p, Burberry ahead 68p at 1392p, Johnson Matthey up 107p at 2304p and Rio Tinto 115.5p higher at 3015p.
The biggest fallers were Randgold Resources down 335p at 5645p, Fresnillo off 30p at 1442p, Shire down 28p at 1851p and Severn Trent off 26p at 1735p.