* FTSEurofirst 300 up 1.3 pct, Euro STOXX 50 up 2 pct
* Fed's stimulus boosts cyclical shares
* Miners lead rally and charts point to further gains
By Francesco Canepa
LONDON, Sept 14 European stocks rallied to a 14-month high early on Friday, led by growth-oriented stocks like miners, after the launch of a new monetary stimulus programme from the U.S. Federal Reserve in its latest attempt to drive growth in the world's largest economy.
After the European closing bell on Thursday, the Fed said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market. It also pushed back expectations for when it would raise interest rates.
"The market is now stuffed with cash," Justin Haque, a pan-European trader at Hobart Capital Markets, said. "There's going to be a switch that could last six months from food & beverage and other defensive shares into cyclicals and banks."
Shares in basic resources companies, which depend on global economic activity and benefit from rising metal prices when inflation rises, led a rally among cyclical stocks, with autos stocks up 3.3 percent and banks up 2.1 percent.
The DJ STOXX Basic resources index added 4.7 percent to 462.55 points, opening higher than Thursday's high of 443.33 in what is referred to as a 'bullish gap', Thomson Reuters data showed.
"The (basic resources) index has posted a strong opening forming a bullish gap on the daily chart," Ouri Mimran, a technical strategist at Natixis said in a note.
He added that a break above a resistance area formed by the 50 percent retracement of the February down move and the October 2011 high, which is between 466 and 475 on Thomson Reuters charts, would send the index towards the 50 percent retracement of the January-October 2011 selloff at 510 points.
The broader pan-European FTSEurofirst 300 index was up 1.3 percent to 1,120.96 points, a level not seen since July 2011 and the euro zone Euro STOXX 50 index was up 2 percent to 2,593.60.
STIMULUS RALLY CONTINUES
European equities extended a three-month rally, largely fuelled by expectations of monetary intervention by the European Central Bank and the Fed.
Since ECB head Mario Draghi said in late July the central bank was ready to take all necessary measures to save the euro, the euro zone's blue chip Euro STOXX 50 index has surged 19.6 percent.
Strategists warned co-ordinated monetary stimulus by the world's largest central banks, including the Bank of England and, possibly, the People's Bank of China, would likely result in higher inflation, posing a threat to consumers and businesses' spending power.
"We think inflation expectations continue to rise, re-rating equities until inflation hits 4 percent," Credit Suisse strategists said in a note.
They recommended taking positions in stocks that benefit from rising prices and highlighted real estate group such as Deutsche Wohnen and Hammerson, or stocks which offer high dividends, which tend to rise with inflation, including BT and Imperial Tobacco.