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Oil spill fears hit Shell; markets rise on QE hopes

Possibility of more quantitative easing, or QE, in the US boosts markets as Shell slides on fears of an oil spill in the Gulf of Mexico.

 
Oil spill fears hit Shell; markets rise on QE hopes

Britain’s markets made a healthy recovery on Thursday as investors were reassured that more quantitative easing (QE) in the US is on hand if the economy deteriorates.

The benchmark UK index of blue-chip shares added 1.34%, or 76 points, to 5,711 and the Mid-250 index took on 1.61%, or 181 points, to 11,415. See the FTSE’s performance and the index’s top risers and fallers.

Shell (RDSb.L) shares fell 11p, or 0.5%, to £21.74, as fears of an oil spill in the Gulf of Mexico unnerved investors.

The group reported that a sheen had been spotted on the water close to its Mars and Ursa production sites, and said it had sent a vessel to investigate the cause.

Shares fell more than 4% as investors, wary of another Deepwater Horizon-style disaster, sold their holdings. However, the shares went on to recover most of their value after the search failed to turn up a leak.

More QE on hand if needed

Markets were boosted as William Dudley, president of the New York Federal Reserve Bank, assured investors that the Fed would be on call for more QE if the economy starts to decline.

Dudley said that 'the incoming data on the U.S. economy generally has been a bit more upbeat over the past few months', but added that it was, 'still too soon to conclude that we are out of the woods', according to CNBC.

The announcement was enough to boost sentiment and brush off rising unemployment figures as new claims in the US rose last week, pushing claims to their highest rates since January.

Stateside markets were cheered by the announcement: the Dow Jones Industrial Average added 1.09% to 12,945, the Standard & Poor's 500 index rose 1.01% to 1,383, and the Nasdaq Composite index increased 1.2% to 3,053.

In Europe, 10-year Spanish and Italian bond yields eased for a second day, as Italy held another successful auction of government debt.

Chris Beauchamp, market analyst at IG Index, said: ‘US jobless claims might be increasing again and the Germans might be plotting another constitutional challenge to the eurozone’s rescue funds, but this has not stopped the market from staging another strong rally.

‘Benchmark bond yields are retreating again, with Spain and Italy drawing away from the dangerous 6% level, even after a bond auction that saw Italian five-year yields rise.’  

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