Eight days not out — FTSE on its biggest roll since 1993

London’s blue-chip shares rack up an 8th straight day of gains – its biggest streak of consecutive daily rises for 16 years

 Gary Duncan, Economics Editor

London’s blue-chip shares racked up an eighth straight day of gains today, marking the FTSE 100 index’s longest winning streak of consecutive daily rises for 16 years.

The market’s upward sprint came as growing optimism over an emerging economic recovery fuelled a new exuberant mood among investors. Since its close on July 12, the potent rally of almost 9 per cent in the FTSE 100 has added more than £90 billion to the value of Britain’s leading companies.

The Bank of England today reinforced the bullish mood in the equity market with a more upbeat prognosis on prospects.

The record of this month’s meeting of its Monetary Policy Committee (MPC) showed that it had concluded that recent indicators were “consistent with a smaller contraction in GDP in the second quarter than it anticipated two months ago”. Official GDP figures due tomorrow are tipped to show that the economy shrank by another 0.3 per cent in the past three months, a much less savage decline than the 2.4 per cent slump in the first quarter.

The MPC’s minutes also revealed that its members see increasing signs that “the momentum going into the second half of the year was greater than . . . expected in May”.

The Bank’s conviction that an economic revival is taking hold was underlined by Charles Bean, its Deputy Governor, although he was cautious over the likely strength of an upturn. “I would think it reasonable to see some slight resumption in the back half of this year,” he said.

The Bank’s hopes for recovery were also emphasised when its regional agents reported more evidence that consumer spending had started to stabilise and that “the recovery in housing market activity had continued”. The agents also found signs of “stabilisation in manufacturing output”.

But worries over conditions in industry were heightened by the latest CBI survey, which suggested that manufacturing orders have fallen this month at their fastest rate since January 1992. Despite their continuing struggle, manufacturers’ confidence still rose to its best levels since October 2007.

The Bank minutes and the CBI’s mixed picture of industry’s fortunes added to uncertainty in the City over the Bank’s next move. The rosier tone of the MPC’s discussion this month fuelled speculation that it could soon call a halt to its radical quantitative easing (QE) scheme to pump newly created money into the economy in an effort to jump-start growth.

Many economists still expect the MPC to increase the total purchases of government and corporate bonds through which it injects the cash to the maximum £150 billion authorised by the Chancellor, from the £125 billion planned at present. The committee unanimously voted to leave both the scale of the QE programme, and interest rates, on hold this month. (Gary Duncan, The Times) http://business.timesonline.co.uk/tol/business/markets/article6723808.ece

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