RTRS: FTSE surges 5.3 pct ahead of U.S. rate decision
*FTSE 100 surges 5.3 pct by midday *Oil and gas producers, banks and miners rally *U.S Fed expected to cut rates by half percentage point
By Harpreet Bhal
LONDON, Oct 29 (Reuters) - Britain's blue-chip shares soared 5.3 percent by midday on Wednesday as investors were buoyed on the hope that the U.S Federal Reserve would cut interest rates to spur economic growth and quell fears of a global recession.
By 1206 GMT the benchmark FTSE 100 .FTSE climbed 210.91 points to 4,137.29, after rising 1.9 percent on Tuesday.
The index is still down more than 15 percent this month, on track for its biggest monthly fall since the crash of 1987, as the global financial crisis continues to worry investors.
Oil and gas producers were the top gainers after crude oil climbed to $64 a barrel to end its three-day losing streak. BP (BP.L: Quote, Profile, Research, Stock Buzz) added 6.1 percent and Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) put on 7.5 percent.
Peter Dixon, UK economist at Commerzbank, said the rally appeared to be a rebound on the back of unsustainably low levels in the last few weeks.
"It is anybody's guess (whether the rally could be sustained). We are going through a period of see-saw volatility," he said. "It could be an extended rally as the period of collapse was pronounced."
Banks rallied on hopes that the Fed will cut rates by half a percentage point from the current 1.5 percent at 1815 GMT. Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), HSBC HSBC.L and Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) soared between 4.6 and 20.6 percent.
China cut interest rates for the third time in six weeks to help the world's fourth-largest economy ride out the global financial turmoil.
The Bank of Japan is also considering lowering its policy rate, a source with knowledge of the matter said. Economists believe that the Bank of England and the European Central Bank could also follow suit.
Mining stocks also tracked gains on the FTSE 100, as metal prices rose. Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) climbed nearly 20 points, while BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) and Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) added between 12.3 and 19.7 percent.
Shares in insurer Old Mutual (OML.L: Quote, Profile, Research, Stock Buzz), Aviva (AV.L: Quote, Profile, Research, Stock Buzz) and Prudential (PRU.L: Quote, Profile, Research, Stock Buzz) leapt between 11.4 and 28.7 percent, while Friends Provident (FP.L: Quote, Profile, Research, Stock Buzz) shed 8.9 percent after soaring 28 percent on Tuesday.
"All the insurers that play in the U.S. market went down by about 10 percent yesterday due to U.S. economic data. Movements (in Old Mutual stock) are getting exaggerated because it is significantly depressed," an analyst said.
Shire (SHP.L: Quote, Profile, Research, Stock Buzz) gained 5.1 percent after the drugmaker said third-quarter sales came in broadly in line with analysts' expectations, driven by sales of its hyperactivity medicines.
Retailers Marks & Spencer (MKS.L: Quote, Profile, Research, Stock Buzz) and Next (NXT.L: Quote, Profile, Research, Stock Buzz) were higher, climbing 2.1 and 10 percent respectively.
Among other individual movers, hedge fund Man Group (EMG.L: Quote, Profile, Research, Stock Buzz) surged 11.4 percent after it said the net asset value of its main AHL fund rose 5.5 percent last week. (Editing by Paul Bolding)
