FTSE leaps as central banks move to boost liquidity

The FTSE 100 has moved 3% higher after the world’s major central banks announced a move to boost liquidity within the financial system.

The UK’s blue chip index, which began the day in negative territory, is now 154 points higher at 5,491, having passed the 5,500 mark following the announcements.

The central bank action, taken by the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve and Swiss National bank, will commence on 5 December.

“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,” the Bank of England said.

“These central banks have agreed to lower the pricing on the existing temporary US dollar liquidity swap arrangements by 50 basis points so that the new rate will be the US dollar overnight index swap (OIS) rate plus 50 basis points. “

The banks will also establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of the their currencies.

Financials including RBS, Barclays and Lloyds Banking Group have built on earlier gains to stand over 7% higher, with European indices also sharply higher.

Germany’s Dax is up 4.6% to 6,066, while France’s Cac 40 is up 4.1% to 3,149. US stock futures point to the S&P 500 opening up 2.7%.

Stocks had earlier returned to positive territory on the news China had cut bank reserve requirements by 50 basis points, its first cut for three years.

The price of a barrel of Brent crude also reversed earlier losses to stand almost $1 higher at $111.7 a barrel.


This article was first published by Investment Week

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