Rolls-Royce Share Buyback Plan Sees UK Stock Markets Surge
Aircraft engine manufacturer Rolls-Royce has propelled the FTSE 100 upwards, surging by more than 5% after it announced plans for a £1 billion share buy-back scheme.
The London benchmark index was initially provided with a positive cue from Wall Street, where the US 500
closed at a fresh record high on the back of the Federal Reserve's latest policy statement.
In addition to making a further $10 billion reduction in its monthly asset purchases, the US central bank revised its long term interest rate outlook, suggesting borrowing costs will be kept close to zero for a 'considerable time' as the country's economic recovery continues.
Speaking during a news conference after the announcement, Fed Chair Janet Yellen said: 'Economic activity is rebounding in the current quarter and will continue to expand at a moderate pace.'
This reassured markets and has helped to support sentiment into the European trading session.
then led the FTSE surge, adding 5.5% after announcing the proceeds from the sale of its gas turbine unit to Siemens will be returned to investors in the form of a share buy-back programme worth £1 billion.
In addition, the company vowed to return to earnings growth this year.
Traders welcomed these developments, which come after the firm was forced to issue a profit warning in February and lost a significant order from the Emirates airline earlier this month.
With market confidence supported by these developments, house builder Barratt Developments and fund manager Aberdeen Asset Management
also contributed to the FTSE's advance, gaining 2.6 and 2.3% respectively.
As of 1:45pm UK time, the London blue-chip index was trading 0.74% higher for the session at 6,828.45 points.
Although it remains less than 3% below its record high set in December 1999, the FTSE has disappointed traders so far in 2014, rising by just 1.1%.
This compares to the Dow Jones Industrial Average's 5.5% climb and the 6% added to the US 500.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
By Jonathan Sudaria, 19 June 2014