FTSE 100 reaches a two-year high

The FTSE 100 Index hit a two-year high today as investors were cheered by the US Federal Reserve's move to boost the economic recovery.

The London market marched ahead nearly 2% or 110 points to 5859 - its highest level since June 2008 - although the Bank of England left the extent of its own emergency measures unchanged.

The Fed opted to inject a further 600 billion US dollars (£372.8 billion) into its quantitative easing programme - dubbed QE2 - last night in a bid to kick-start its lagging recovery.

Analysts said many companies on the UK market do business with the US and could feel the benefits of QE2 if the package is successful.

And two of the largest sectors on the Footsie - oil and mining - usually trade in dollars, so as it weakens, prices go up and so do stocks.

Michael Hewson, currencies analyst at CMC Markets, said the Fed's announcement had "thumped" the dollar across the board, strengthening the pound to almost 1.63 US dollars.

Companies such as miners Eurasian Natural Resources, Xstrata and BHP Billiton, surged to the top of the Footsie as the dollar dwindled.

Sentiment has also been lifted by a decent run of third quarter results on both sides of the Atlantic.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said the Fed's announcement had created a sense of euphoria in the market.

However, he added: "Whether QE2 is going to have its impact in the States remains to be seen, and in terms of the UK, we are getting nearer to the age of austerity.

"Having said that, the third quarter reporting season is under way, and the vast majority of companies have actually exceeded analyst expectations."

The US central bank said it would roll out its second batch of monetary stimulus incrementally over the next eight months.

The US previously injected some 1.7 trillion US dollars into the economy through quantitative easing at the height of the recession.

Confronted with unemployment of nearly 10% and critically low inflation, the Fed decided it was appropriate to pump more cash into the world's largest economy.

It is hoped further quantitative easing could encourage banks to lend, drive down long-term interest rates and encourage investment, lower the dollar's exchange rate and stimulate spending.