Energy stocks lead FTSE's bounce back on Yellen comments

Thu Nov 14, 2013 7:12am EST

* FTSE 100 up 0.5 percent
    * Yellen says Fed needs to do more to aid economy
    * Sainsbury leads consumer staples higher
    * Centrica falls after warning on earnings


    By Alistair Smout
    LONDON, Nov 14 (Reuters) - Britain's top shares rebounded on
Thursday, led higher by energy stocks after the Federal
Reserve's Janet Yellen eased worries the U.S. central bank may
start scaling back its stimulus programme this year.
    Yellen, in remarks released ahead of the Senate hearing on
Thursday to confirm her as new Fed president, said the central
bank had "more work to do" to help the economy, indicating she
was in no hurry to start trimming the bond-buying programme that
has fuelled an equity rally this year. 
    "Yellen is a well-known dove, so won't tighten very soon. I
expect it to be around the end of the first quarter of 2014,"
Robert Quinn, chief European equity strategist at S&P Capital
IQ, said.
    With appetite for risk boosted by the Fed's comments,
cyclical stocks such as energy companies rallied,
adding a combined 20 points to the index's gains.
    The FTSE 100 rose 31.92 points, or 0.5 percent, at
6,661.92 by 1136 GMT, recovering from a sharp fall on Wednesday
when the Bank of England gave a stronger forecast for the UK
economy, bringing forward expectations for when interest rates
will rise and so sending sterling higher, hitting exporters.
  
    Consumer staples contributed 6 points to the index and were
led higher by food retailer Sainsbury, which climbed
2.7 percent towards the top of the FTSE 100 leaderboard as
brokers raised recommendations and target prices across the
board following results on Wednesday.
    British luxury brand Burberry was up 1.4 percent
after first-half sales exceeded 1 billion pounds ($1.6 billion)
for the first time. 
    "The results are another welcome indication of the healthy
position (CEO) Angela Ahrendts leaves the firm in when she
passes the reins onto Christopher Bailey next year," Toby
Morris, senior sales trader at CMC Markets, said in a note.
    However, earnings remain a concern for investors in Europe.
Equities have re-rated above long term averages, even though
profits and revenues continue to disappoint. 
    Fifty percent of firms in Europe have missed analysts'
earnings forecasts in the third quarter so far, while 63 percent
have missed sales estimates, heaping more pressure on margins.
    British Gas owner Centrica, one of Britain's big six
utilities under fire from politicians for hiking bills, fell 4.2
percent, topping the list of FTSE fallers and dragging the
utilities sector lower after it warned that earnings would not
grow this year. 
    Drinks can maker Rexam fell too, down 1.8 percent
after it warned on the outlook for trading in Europe where it
generates more than 23 percent of its revenues, according to
Thomson Reuters data.