Ftse soars after loans boost

 

Investors dived into the markets today after six central banks including the Bank of England announced a coordinated bid to boost lending to households and businesses.

The FTSE 100 Index was nearly 3% higher after the banks, including the European Central Bank (ECB) and US Federal Reserve, agreed to lower interest rates on US dollar loans, which should encourage lending between banks and help stave off economic stagnation.

The move comes amid fears of a looming second credit crunch as the unresolved eurozone debt crisis continues to pile pressure on the banking sector.

Shares in Britain's biggest banks were boosted by the announcement, with Lloyds Banking Group up 8%, Barclays ahead 7% and Royal Bank of Scotland rising 5%.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "The world's central banks have shown the European area the meaning of decisive and coordinated action."

The announcement, which will make it easier for banks and financial institutions to access dollars, primary currency for funding, came as an additional boost to the London market.

The FTSE 100 was already ahead amid reports that financial leaders had agreed to increase the eurozone bailout fund and would use it to underwrite 20% to 30% of Government bond purchases made by private investors.

The deal should drive down borrowing costs for countries such as Italy that have recently been forced to pay nearly 8% on bond markets, and help reduce fears of a eurozone collapse.

But markets leapt ahead after the central banks made their announcement, with Germany's Dax and the CAC-40 in France both up more than 4%.

In a statement, the Bank of England said: "The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."

Tom Levinson, analyst at ING Bank, said the move was encouraging as it targets a "key area of concern", the inability of banks to access funds in the stressed marketplace.

But Mr Levinson warned sceptics would be concerned such measures were being taken in the absence of a concrete resolution to the eurozone debt crisis.

He said: "Unless the eurozone comes up with a convincing answer soon we would expect downward euro pressure to resume, with central banks forced to get ever more creative as their toolboxes are emptied."

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive + incentives + uncapped comms: SThree:...

Recruitment Genius: Telesales Executive - OTE £25,000

£13000 - £25000 per annum: Recruitment Genius: Would you like to be part of a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future