Leading shares are on course for their biggest weekly rise for more than two years, as investors shrugged off fears of a Russian rouble crisis, political problems in Greece, falling oil prices and worries about global growth.
The US Federal Reserve’s comments on Wednesday that it would be “patient” about raising interest rates has reassured markets that an imminent rise in borrowing costs was not on the cards.
An overnight surge on Wall Street - up 421 points or 2.4% - and a rise in Asian markets has spilled over to Europe, with the FTSE 100 up 45.80 points at 6511.80.
So far this week the leading UK index is up 3.3%, on track for its best weekly performance since November 2012.
After earlier volatility, Russia’s currency has stablished after central bank actions to support the financial system. On the economic front the Bank of Japan issued an upbeat outlook, raising hopes the country could come out of recession soon.
As for oil, Brent crude has edged up 1% to $59.88 a barrel, although the recent weakness is still hitting oil services group Petrofac, down 23.5p at 698.5p.
Low oil prices are thought to be bad for equities since it shows a lack of global economic demand, but they could also boost consumer confidence. Roland Kaloyan at Societe Generale said:
The drop in oil price has recently put pressure on the equity market (oil sectors weight 8% of European and US equity markets). However [there is] historical evidence that a fall in oil price is a positive for equities, with a clear acceleration in performance after six months. Furthermore, European headline inflation, which should soon be in negative territory due to lower energy prices, would be another good reason for the ECB to implement a QE, boosting European equities.
On the oil services sector, he said:
Historically, the sector underperforms the market in a context of both rising equity indices (because of its defensive status) and falling oil prices.
Other fallers included energy companies. SSE is down 27p to £16.21 after it accepted regulator Ofgem’s latest price control proposals.
At the same time the outcome of the government’s capacity auction has seen lower than expected payments to energy companies to keep power plants on line, also hitting SSE and Centrica, down 0.8p to 271.1.
Tesco continues it recent recovery, up another 5.05p to 180.85p.
WPP has risen 38p to £13.40 after Citigroup raised its price target to £14.50 from £13.50 after a spate of recent acquisitions, including a Mexican digital agency on Thursday.
