The Fed's decision to keep interest rates on hold, along with strong results from Unilever and a surprise jump in UK house prices has buoyed the FTSE, mitigating falls in banking stocks.
Last night the Fed reiterated that interest rates will be kept on hold for an 'extended period', helping to settle market nerves after Standard & Poor's downgraded Spain's credit rating yesterday. Fed officials were very careful in the wording of their news, realising that any signal of tightening could add to the anxiety over Europe's deficit issues. 'The Fed today gave no hint that policy tightening is anywhere on the visible horizon,' said Michael Feroli at JPMorgan.
While the Fed acknowledged the encouraging economic indicators of late, they remained cautious about the sustainability of current growth, given that unemployment remains high, although they did also acknowledge that the condition of the labour market shows signs of improvement. This commitment to low rates for the foreseeable future should see the US dollar remain relatively depressed in the short term, boosting demand for cheaper commodities. This saw miners BHP rise 0.92% to 2077.5p, Anglo American add 0.68% to 2826.50p and Xstrata gain 0.31% to 1131p.
By 11.00am the FTSE was 0.53% stronger at 5616.
Unilever brought some much-needed cheer to investors today, unveiling a 33% rise in profits of €973 million. This beat analyst expectations of €909 million and saw the stock surge to the top of the FTSE leader board, rising 3.55% to 1984p. The results have permeated throughout the sector, lifting Diageo, Tesco, Marks & Spencer and Sainsbury. Procter & Gamble, the world's largest consumer goods company, will release quarterly results later today. Its shares traded 0.44% higher in pre-market trading, suggesting the market expects the company to report solid results as well.
Homebuilders Persimmon, Hammerson and Barratt Developments rose after Nationwide announced a surprise jump in UK house prices. According to the lender, UK house prices increased 1% in April, exceeding expectations of 0.4%. The rise has been supported by a shortage in supply and very low interest rates, along with reduced taxes on purchases under £250,000.
Banking stocks have bucked today's positive trend, though, continuing to slide on the back of persistent concerns over Europe's fiscal deficit woes. Officials from the International Monetary Fund and European Union met yesterday in Berlin, reasserting their commitment to support market-battered Greece, but also revealing up to €120 billion may be needed to support the country over the next three years. The sense of unease regarding the eurozone's financial wellbeing was ramped up further by the news of Spain's downgrade from AA+ to AA by S&P. Unsurprisingly, it is banking stocks that have been hit the hardest, with Lloyds Banking Group dropping 2.29% to 65.63p and Royal Bank of Scotland falling 0.73% to 3509p.
