September 16, 2011 / 8:56 AM / 8 years ago

FTSE boosted by central bank manoeuvres

* FTSE 100 up 0.2 percent

* Barclays leads banks higher

* BG firms, Brazil unit attracts China interest-FT

By Tricia Wright

LONDON, Sept 16 (Reuters) - Britain’s FTSE nosed higher on Friday, lifted by coordinated action from global central banks and hopes the euro zone would boost its bailout fund as U.S. Treasury Secretary Timothy Geithner and European finance ministers prepared to meet.

The UK benchmark was 8.88 points, or 0.2 percent, higher at 5,346.42 by 0824 GMT, having extended its rally into a third day on Thursday, jumping 2.1 percent.

Banks , normally the most responsive to the twists in the euro zone story, were in demand.

Barclays was the biggest beneficiary, up 2.5 percent, while Lloyds Banking Group added 0.7 percent after the European Central Bank and those of Britain, Japan and Switzerland joined forces on Thursday to reintroduce three- month dollar liquidity operations in the third quarter.

Some market operators were pessimistic the gains would be anything other than short-lived.

“Today’s another ‘big’ day with Geithner meeting with European finance ministers,” said Lex van Dam, hedge fund manager at Hampstead Capital, which manages some $500 million of assets.

“They will probably come up with another short-term solution which will lead to further long-term problems. The market might take it well though as sentiment (broadly speaking) is so negative.”

Buyers also came in for energy stocks as risk appetite increased, for now. BG Group led the way, up 2.1 percent after the Financial Times reported that Chinese oil firms have been circling its fast-growing Brazilian business.

The improved mood came at the expense of gold , which slipped more than 1 percent on Friday, heading for its biggest weekly drop since March 2009.

Related stocks felt the negative knock-on impact. Blue-chips Fresnillo and Randgold Resources fell 1.7 percent and 0.4 percent respectively, and midcap African Barrick Gold was 1.5 percent weaker.

In evidence risk appetite has increased, the 30-day implied volatility for the FTSE 100 fell 16 percent on Thursday to hit a two-week low though it remained elevated compared with the beginning of August, according to Thomson Reuters Datastream.

Technical analysts were bullish on the FTSE 100 index in the wake of Thursday’s strong advance, which puts it within striking distance of the Aug. 31 close of 5,394.53, a move through which will mean the market has erased the sharp sell-off from earlier in the month.

“Based on the longer-term range formed by the July top at 6,084.10 to the August bottom at 4,791.00, the retracement zone at 5,437.55 to 5,837.12 is a reasonable upside target,” James Hyerczyk, analyst at Autochartist, said.

“The first time this area was tested was on September 1 when the market topped at 5,449.70. Regaining this retracement zone will put the market in a strong position to rally further,” he said.

News of the surprise move by the central banks, to offer three-month dollar loans to commercial banks to prevent money markets freezing up, was applauded by investors whose confidence was already on the rise before the announcement on hopes for the avoidance of an imminent Greek default.

“It is significant. It signals that policymakers recognise that there’s a problem, and obviously there is, but anyone who thinks that this is somehow a panacea or a silver bullet for the underlying structural problems has been on the booze,” Michael Hewson, market analyst at CMC Markets, said.

(Additional reporting by Dominic Lau)

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