By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Stocks rallied to an almost seven-week
high in London on Thursday as the impact of the U.S. Federal
Reserve's surprise decision not to pare its bond purchases offset
disappointing U.K. retail sales.
The FTSE 100 index climbed 1% to 6,625.39, marking the highest
close since Aug. 2.
The solid move came as investors welcomed the U.S. Fed's
decision on Wednesday to push back a reduction in its
$85-billion-a-month asset purchases to wait for more evidence of
economic progress. Analysts had largely expected the central bank
to start tapering its asset purchases at the September meeting, but
rising mortgage rates and reduced federal spending kept the Fed on
the sidelines for now.
In a news conference, Fed Chairman Ben Bernanke said the bank
might still scale back its purchases before the end of the year,
but it will depend on whether growth and the pace of hiring show
greater strength.
The delay in the tapering process pushed gold and silver prices
higher, triggering a rally for London's precious miners.
Shares of Polymetal International PLC jumped 7.9%, Randgold
Resources Ltd. leapt 8.1% and Fresnillo PLC picked up 6.1%.
Other miners followed as the broader metals complex moved
higher. Shares of Anglo American PLC climbed 3.7%, Rio Tinto PLC
(RIO) rose 1% and BHP Billiton PLC (BHP) gained 1.3%.
Shares of commodity titan Glencore Xstrata PLC added 2.8% after
Exane BNP Paribas lifted the company to outperform from
neutral.
Among other notable movers, banks helped lift the index in
London. Shares of Standard Chartered PLC gained 3.3% and Royal Bank
of Scotland Group PLC (RBS) added 1%.
On a more downbeat note shares of Johnson Matthey PLC dropped
1.5% after UBS cut the chemicals firm to neutral from buy.
The broader gains in London came even as the Office for National
Statistics said retail sales dropped 0.9% in August month-on-month
after a 1.1% rise in July.
"The first disappointing U.K. data for some time today, but that
probably says more about the weather and how far expectations had
moved up than it does about the U.K.'s underlying recovery story,"
Rob Wood, chief U.K. economist at Berenberg, said in a note.
"But today's data do serve to highlight that the recovery will
remain fragile while households' finances remain heavily squeezed.
Consumers will probably have to take their foot off the gas a
little in the new year as they deal with still falling real wages,
so wider economic growth could slow a little," he added.
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