London shares rally on central bank rate pledges

The London Stock Exchange building in central London, pictured on March 7, 2013. London's FTSE 100 index shares rallied after the Bank of England and European Central Bank separately signalled that monetary policy would focus on stimulating the economy for some time. (AFP/File)

LONDON (AFP) – London's FTSE 100 index shares rallied on Thursday after the Bank of England and European Central Bank separately signalled that monetary policy would focus on stimulating the economy for some time.

London's benchmark FTSE 100 index shot up 3.08 percent to 6,421.67 points.

The BoE hinted that it was unlikely to lift record-low borrowing costs any time soon after wrapping up the first policy meeting led by its new governor, Canadian Mark Carney.

The bank's nine committee members, including Carney, voted by majority to keep the central bank's main lending rate at an all-time low point of 0.50 percent and decided also to stick by the amount of new money being used to help stimulate the economy.

But the unexpected hint over the outlook for rates contained in a longer-than-usual final statement, issued at the conclusion of the BoE's latest monthly meeting, caused investors to offload sterling and buy British-listed shares.

"The clear impression is that a Carney-led BoE has a distinctly dovish bias," said Royal Bank of Scotland economist Ross Walker.

"The statement sends a clear, decisive signal -- Mr Carney has not spurned an opportunity to provide early guidance, which we expect to be supplemented in subsequent months."

The BoE on Thursday also decided that its bonding-buying stimulus policy, known as quantitative easing (QE), would remain at ??375 billion ($572 billion, 440 billion euros).

The European Central Bank also promised to keep its interest rates at current record low levels for an "extended period" or even cut them to support the ailing eurozone economy.

Seeking to calm worries about Portugal, where a political crisis sparked by austerity has rocked markets and driven up borrowing rates this week, Draghi assured that the country "is in safe hands".

The ECB's governing council voted to hold its key interest rate at an all-time low of 0.50 percent for the third month in a row.

Draghi vowed that "monetary policy will remain accommodative for as long as necessary," in remarks to a press conference.

The ECB's decision-making governing council "expects the key ECB interest rates to remain at present or lower levels for an extended period of time," Draghi said.

"Our exit (from low interest rates) is very distant."

Back in London, Lloyds Banking Group remained the most traded blue-chip, with 216.50 million units changing hands.

Telecommunications giant Vodafone held on to second place with 65.02 million units being swapped by investors.

The day's top performer was the Royal Bank of Scotland up 5.22 percent at 284.10.

Wolseley was also in demand climbing 5.09 percent at 3200

Schroders was the biggest faller, down 0.84 percent to close at 2236.

BskyB was also under pressure slipping 0.18 percent to close at 812.50.

On the currency markets, the pound fell to $1.5078 at 5.04pm from $1.5283 on Wednesday evening and fell to 1.1668 euros from 1.1749 euros over the same period.