Britain's leading shares were firmer on Thursday, recouping some of the previous session's sharp falls after comments from the U.S. Federal Reserve reignited expectations it could soon embark on fresh stimulus measures to boost growth.
Investors read minutes from the July 31-Aug 1 FOMC meeting, published after the London close on Wednesday, as suggesting the Fed is likely to launch a third quantitative easing programme, nicknamed QE3, fairly soon, to help a sluggish U.S. economy. .
"The minutes said unless there is a substantial and sustainable improvement in the data coming out of the U.S., addition accommodation would be necessary. This would certainly indicate that we'll see a major announcement after the (Fed) meeting," said James Hughes, chief market analyst at Alpari (UK).
Those Fed hopes, combined with expectations of further action from the European Central Bank next month to alleviate the euro zone debt crisis, served to give UK stocks a lift, with risk-sensitive miners, banks, and energy stocks leading the rally, having headed the fallers in the previous session.
At 1045 GMT, the FTSE 100 index was up 22.38 points, or 0.4%, at 5,796.58, after losing 1.4% on Wednesday, but remained below the psychologically important 5,800 level.
Miners were the strongest gainers in spite of further weak earnings reports in the sector, with blue chip Kazakhmys and mid cap Petropavlovsk both reporting steep falls in profits.
Kazakhmys added 0.6%, having fallen more than 4% on Wednesday, but still underperfomed the broader mining sector, which was up 1.4%.
Petropavlovsk shed 14.4%, the top FTSE 250 faller, with the mid cap index up 0.2%.
Some 88% of miners have missed second quarter expectations with earnings contracting 47% year-on-year, according to Thomson Reuters Starmine data.
OUTLOOK DENTS IMI
A cautious outlook statement with first-half earnings weighed on IMI, down 2.6% and the top FTSE 100 faller, after the engineer warned the pace of growth was likely to slow in the second half on weakening economic conditions in Europe, taking the gloss off a 4% rise in profit.
However, solid earnings lifted Diageo 1.0% higher, as the world's biggest spirits group posted a 13% rise in full-year profit, putting it on track for its medium-term targets.
Markets sought further direction from Wall Street, with U.S. stock futures pointing to modest early gains on Thursday, with futures for the S&P 500, the Dow Jones and the Nasdaq 100 up 0.1 to 0.2%, with the key indexes having ended flat to lower on Wednesday.
Investors will eye the latest U.S. weekly jobless claims numbers, due at 1230 GMT, together with U.S. flash preliminary Markit manufacturing PMI data for August at 1258 GMT, and July U.S. new home sales due at 1400 GMT, for clues as to the state of the world's biggest economy.
"Despite the good news from the Fed last night, markets are not necessarily expected to take off sharply to the upside as the Fed hasn't necessarily detailed in what way they might provide further support to the economy," said Ishaq Siddiqi, Market Strategist at ETX Capital in a note.
"Some investors may possibly feel tempted to lock in some profit after the recent run up in share prices in the last couple of weeks especially as there haven't been any major pullbacks for while and a period of consolidation with the markets taking a breather wouldn't necessarily be too much of a surprise," Siddiqi added.
