London's FTSE 100 rises as Bank of England steps in to stabilise markets



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FTSE 100 up 0.3%, FTSE 250 flat

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BoE to start unlimited bond purchases to stabilise market\

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Miners lead gains

(Updates to market close)

By Johann M Cherian, Bansari Mayur Kamdar and Susan Mathew

Sept 28 (Reuters) - London's blue-chip FTSE index erased steep session losses to close higher on Wednesday, while the mid-cap index cut all of its bruising 3% plunge after the Bank of England's promise of bond purchases lifted sentiment.

The BoE said it would buy as many long-dated government bonds as needed between now and Oct. 14 to stabilise financial markets, adding that it would postpone the planned start of its gilt sale programme. UK gilt prices soared.

The move came after the pound GBP= sank to record lows earlier this week in the wake of Britain UK's new economic strategy. On Wednesday, the International Monetary Fund censured the plan while rating agency Moody's warned large unfunded tax cuts were "credit negative" for Britain.

"This shows that the Bank is going to do all it can to prevent a financial crisis and it is already working," said Paul Dales, chief UK economist at Capital Economics.

The blue-chip index .FTSE rose 0.3% after dropping as much as 2.1% to six-month lows earlier in the session. The more domestically focused FTSE 250 .FTMC closed down flat, recovering from two-year lows.

As copper prices recovered, miners .FTNMX551020 were the biggest boost to the FTSE 100, followed by healthcare .FNMX201030 and energy .FTNMX601010 stocks.

Markets globally took heart with euro zone shares .STOXXE rising 0.3%, while U.S. stocks rallied after a dizzying sell-off over the past few weeks.

Stock markets have been hit globally this year amid worries that aggressive monetary policy tightening to curb stubbornly high inflation could tip economies into recession. The FTSE 100 has lost 5% so far this year.

"The fact that it needed to be done in the first place shows that the UK markets are in a perilous position. It wouldn't be a huge surprise if another problem in the financial markets popped up before long," Dales said.

"Either way, the downside risks to economic growth are growing. And the Chancellor's 2.5% real GDP growth target is looking even more unachievable."

Weighing on the index, rate-sensitive banking stocks .FTNMX301010 declined 2.5%.

Among individual stocks, Burberry Group BRBY.L rose 5.0% after announcing Daniel Lee would be its new chief creative officer.
Reporting by Susan Mathew, Johann M Cherian and Bansari Mayur Kamdar in Bengaluru; Editing by Uttaresh.V, Savio D'Souza, Shounak Dasgupta and Mark Heinrich

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