LONDON (Alliance News) - The UK's main stock indices closed higher Tuesday, with both the FTSE 100 and FTSE 250 closing up for a fifth consecutive day, as Federal Reserve Chair Janet Yellen suggested the central bank will continue to taper its quantitative easing programme in coming months.
In her inaugural speech as chair of the Fed, Yellen told Congress that she plans to continue with the policies forged under predecessor Ben Bernanke.
The Federal Open Market Committee began tapering its massive bond-buying programme late in Bernanke's term, and will continue to do so as long as data shows further improvement in the labour market, Yellen said.
"Let me emphasize that I expect a great deal of continuity in the FOMC's approach to monetary policy. I served on the Committee as we formulated our current policy strategy and I strongly support that strategy," said Yellen.
"We have been watching closely the recent volatility in global financial markets. Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook," she added.
Yellen said the nation's "economic recovery gained greater traction in the second half of last year," pointing to 1.25 million new jobs added since the previous monetary policy report of July 2013, and 3.25 million new jobs since August 2012. Even with those numbers, "the recovery in the labor market is far from complete," she said.
The FTSE 100 closed up 1.2% at 6,672.66, meaning it has now recovered most of a sharp fall at the end of January and is less than 80 points below the level it opened the year at. The FTSE 250 closed up 1.1% at 16,078.28, and the AIM All-Share closed up 0.3% at 868.23.
Positive sentiment was evident around the world. The CAC 40 in Paris closed up 1.1%, with the DAX 30 in Frankfurt up 2%. Earlier in the day, Asian stocks closed materially higher, with the Shanghai Composite ending up 0.8%, and both the Nikkei and Hang Seng closing up 1.8%.
At the close of the European markets, Wall Street was also higher. The DJIA, NASDAQ Composite and S&P 500 are all up around 0.7%.
London's large- and mid-cap indexes were helped by a number of strong corporate performances Tuesday, in particular general retailers and gold miners.
Non-food retailers saw their shares rise after a report by the British Retail Consortium revealed UK retail sales rose by more than expected in January.
Like-for-like sales at stores that have been open for one year or more were up 3.9% in January, the strongest increase since April 2011, and significantly higher than both the 0.4% growth recorded in December and the 0.8% increase forecast by economists. Overall retail sales were up 5.4% on the year.
FTSE 100-listed Sports Direct International closed up 3.4%, Marks & Spencer closed up 3.3%, and Next closed up 2%, with FTSE 250-listed Debenhams closing up 5.1%, and Dixons Retail up 2.4%.
Gold miners Fresnillo and Randgold Resources also performed well, closing up 5.7% and 3.5% respectively, on the back of an increase in the gold price. At the European equity market close, the yellow metal was trading at a three month high of USD1,291.05 per ounce, having jumped nearly 4% since the beginning of February.
Fresnillo, closing as the leading blue-chip gainer, was also buoyed by the news that a district court in Mexico has denied the request by the Ejido El Bajio agrarian community to prevent the lifting of the explosives permit covering Fresnillo's Herradura and Soledad mines.
Babcock International Group, closing up 4%, was also among the leading gainers in the FTSE 100. The company said its bid pipeline has increased by GBP3.0 billion to GBP18.5 billion since the half-year end, making good on its promise at the time that "significant" long-term growth opportunities were being progressed.
Barclays was one of the index's few losers. The bank had seen its stock rise Monday after it pre-released its key profit figures, but the shares have fallen again Tuesday as it revealed that it is raising its bonus pot despite making slower progress on cost cutting than analysts had expected.
Barclays closed down 2.4%, making it the second biggest faller in the FTSE 100.
Food retailers were also big fallers Tuesday. Sainsbury closed down 2.1%, Tesco down 1.8%, and WM Morrison down 1.3%. Shore Capital attributed the decline to a 1.2% decline in like-for-like food salin the BRC report.
In the FTSE 250, Kazakhmys , closing up 18%, was the index's leading gainer. The group's shares jumped after the National Bank of Kazakhstan effectively devalued its currency, the tenge. The central bank said it would intervene in the forex market to support the tenge only at KZT185 to the US dollar, a 19% devaluation from Monday's rate.
In the forex market, the dollar jumped in the immediate aftermath of Yellen's speech, before retracing. The euro fell to a daily low of USD1.3626, while sterling dipped to USD1.6429. The currencies soon recovered, however, and, at the London stock market close, the euro trades at USD1.3652, with the pound at USD1.6466.
In the data calendar Wednesday, Chinese trade data will be released overnight, with EU industrial production figures for December scheduled for 1000 GMT. The Bank of England releases its Quarterly Inflation Report at 1030 GMT, with the central bank's governor Mark Carney giving a speech at the same time. European Central Bank President Mario Draghi gives a speech at 1530 GMT.
In the US, MBA mortgage applications are due at 1200 GMT, ahead of the US monthly budget statement at 1900 GMT.
In the corporate calendar, blue-chips Tullow Oil and Reckitt Benckiser are joined by FTSE 250-listed Telecity Group in releasing 2013 full-year results. Also in the FTSE 250, African Barrick Gold releases preliminary full-year results, while WS Atkins provides an interim management statement.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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