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Markets Rise on US and Asian Good News

Markets ticked up on Wednesday as the US authorities indicated interest rates would remain low for some time.

Morningstar 17 March, 2010 | 5:54PM

This laid to rest any lingering fears of a hike in interest rates on the back of improving GDP figures.

There was also good news from Asia, as Japan took further steps to combat deflation and the World Bank raised its growth outlook for China. In Japan, the central bank decided to double its programme of three-month, low rate loans to banks. Analysts debated the efficacy of the measures, but it did show willing on the part of policymarkers.

The World Bank raised its GDP forecast for China for the full year 2009 to 9.5%. Its report suggested that there remained a significant risk of a bubble in asset prices unless China adopted a stricter monetary policy. Its punchy growth forecast may also inflame the US/China row on the value of the renminbi. However, the Bank also said it didn’t see inflation as a significant problem in the medium term.

Markets responded positively. The FTSE 100 closed up 21 points to 5,642 with the CAC 40 and Dax showing similarly robust gains. The US markets were all ahead as European markets closed.

The biggest rise on the FTSE 100 was bus and train group Arriva. Its shares jumped 16.8% to 677p on news that it had received an unsolicited bid. It didn’t name its suitor, but Deutsche Bahn AG, Singapore's ComfortDelGro Corp. Ltd. (C52.SG) and private-equity firm Kohlberg Kravis Roberts & Co were all in the frame.

The potential deal boosted other transport groups with National Express, Firstgroup and Stagecoach all up on the day.

The prospect of stronger global growth drove commodities groups higher. Xstrata, Eurasian Natural Resources and Kazakhmys led the gains among the large caps.

Kingfisher, received a boost as HSBC upgraded it from neutral to overweight, sending the shares up 2.42% to 228.4p. This comes in spite of the group's recent trading statement, which suggested it was still cautious on the outlook for its homeware businesses. It brought some of the retail sector up with it, as Next and Home Retail Group saw gains.

Pulling the market in the opposite direction was Thomas Cook, which fell 2.82% to 244.9p as investors digested yesterday's announcement of a tie-up with Russian group Natalie Tours. Standard Life was also weaker as markets reversed its recent strong run.

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