LONDON: Gains in miners outstripped falls in defensive stocks as the impact of the ECB's bond-buying plans helped push the FTSE 100 up by midday on Friday, while investors were also hoping for solid US jobs data later in the day.
By 1026 GMT, the FTSE 100 gained 9.92 points, or 0.2 percent, at 5,787.26, adding to the previous session's 2.1
percent rise after the European Central Bank agreed to launch a new and potentially unlimited bond-buying programme to lower struggling euro zone countries' borrowing costs and draw a line under the debt crisis.
"I think it caught a lot of investors by surprise. What Draghi achieved was conveying the impression that the ECB has become something of a different entity and stripped it of the Bundesbank mindset," said Mike Lenhoff, the chief strategist at Brewin Dolphin Securities. The German central bank has been firmly opposed to the ECB buying bonds.
"Hopefully he has produced something that will diminish the tail risk for the euro ... which eliminates some of the uncertainties over global growth, illuminates the prospects for earnings and equities, while the need to run to safety and flight to quality is greatly diminished," he said.
BofA Merrill Lynch also said in a note it had completely misjudged the price action going into the ECB meeting.
Miners, which had their best day on Thursday since Draghi's late July announcement that the ECB would do what it takes to save the euro, were the best-performing sector again, rising 3.1 percent.
Evraz led the gainers, jumping 11.8 percent as the Russian steelmaker extended its rebound from record lows, although it remains the second-worst performing stock on the index in 2012.
Adding to optimism within the sector, China gave the green light for 60 infrastructure projects worth more than $150 billion as it looked to energise an economy mired in its worst slowdown in three years, fuelling expectations that the world's growth engine may get a lift from the fourth quarter.
"This signal from Chinese policymakers reminds us all that they still have plenty of tricks up their sleeves and are still learning how to use them," a London-based trader said.
Xstrata rallied 5.7 percent after commodity trader Glencore raised its offer for miner to 3.05 new shares for every Xstrata share, up from 2.8, to salvage a bid now worth about $37 billion that had appeared to be heading for the rocks after Xstrata shareholder Qatar held out for more.
Glencore was the blue chip index's top faller, down 5 percent.
Apart from Glencore, the other main fallers were perceived defensive stocks such as Imperial Tobacco, drinks firm Diageo and drugmaker GlaxoSmithKline, which fell up to 2 percent.
US JOBS
After upbeat data from the world's biggest economy on Thursday, Wall Street futures pointed to a positive open on expectations of decent non-farm payrolls data at 1230 GMT.
US employers are expected to have increased payrolls by 125,000 workers last month, according to a Reuters survey of economists, although data earlier this week showed US private employers added a better-than-expected 201,000 jobs in August, triggering hopes of forecast-beating payrolls.
"If these numbers beat what was originally expected (of course people are now adjusting expectations) and we see some marginal adjustment, then there is no need now for the Federal Reserve to offer more stimulus next week, and there is a solid basis for the markets to react to the economy improving rather than some whimsical stimulus package," Brewin's Lenhoff said.
The more positive tone set by the ECB and the US data kept investors' fire burning brightly for riskier assets such as banks, which were up 2 percent.
Barclays climbed 5.5 percent after Deutsche Bank raised its rating on the UK bank to "buy" from "hold" on valuation grounds and supported by the stability it sees provided by the appointment of the new management and the ECB's bond-buying plans.
The bank says Barclays is inexpensive on 4.3 times 2013 earnings and 0.5 times tangible net asset value ratio.
"Given more clarity on Barclays' leadership (new CEO Antony Jenkins and new chairman Sir David Walker) and the terms under which the ECB will support Italian and Spanish sovereign bond markets, and the extreme valuation, we are upgrading Barclays to 'buy'," it says.
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