* FTSE 100 closes up 0.5 percent
* Growth-related stocks gain as Fed plays down exit talk
* Banks lifted by Lloyds, RBS capital plan approval
* FTSE could push on to 7,000 - Credit Suisse
By Alistair Smout
LONDON, May 22 Growth sensitive sectors drove
Britain's top share index to fresh 13 year highs, receiving a
boost after the top U.S. central banker reaffirmed his
commitment to continued stimulus.
Federal Reserve chairman Ben Bernanke said that central bank
needs to see further signs of traction before taking its foot
off the gas, helping to spike the FTSE 100 to an
intraday high of 6,875.62, its highest level since January 2000.
"Everyone was expecting a bland, non-committal statement,
but in the end we got strong confirmation of current policy and
basically a green light for risk assets," Matt Basi, senior
sales trader at CMC Markets, said.
"We're seeing a very strong performance from those sectors
that are usually associated with good data, but with poor data
across the world the focus is still on central bank stimulus."
Bernanke's written testimony offered no sign that he is
ready to retreat from the Fed's latest round of bond buying,
although stocks pared gains when he discussed exit strategies in
Banks and miners were the top sectoral gainers, as so-called
cyclicals, sensitive to economic stimulus, led the blue chips
higher, shrugging off weak UK retail data. They combined to
contribute over 18 points to a 36.40 point advance on the FTSE
100 index, which closed 0.5 percent higher at 6,840.27
The banking sector received a lift after state-backed
British lenders Lloyds Banking Group and Royal Bank of
Scotland agreed plans to shore up their capital with the
financial regulator, removing a barrier to the government
offloading its shares.
Lloyds and RBS traded up 2.3 and 2.2 percent respectively,
with RBS having traded in negative territory before its
Gains in miners came as copper hit a 6-week high, and the
sector rose 1.6 percent, taking gains since mid
April to 9.3 percent.
Even at these lofty levels, the FTSE 100 is trading at a
favourable price-to-earnings ratio compared to when it made its
all-time highs 13 years ago, with Beaufort Securities noting
that the end-2000 price-to-earnings ratio on UK stocks was 43
percent higher than now.
If the FTSE 100 was to trade at such multiples today, it
would imply an index value of over 9,600.
Credit Suisse remains "overweight" in UK equities and
anticipates that the FTSE 100 will top 7,000.
"We stay overweight the UK as 85 percent of sectors trade
below their global peer group (and) rising inflation
expectations should lead to a re-rating of equities," analysts
at Credit Suisse said in a note.
(Editing by Toby Chopra)