* BoE keeps rates unchanged; ups QE by 25 billion pounds
* Defensive telecoms, food retailers gain
* Firm U.S. data lifts sentiment
* Banks slightly weaker
By Simon Falush
LONDON, Nov 5 (Reuters) - Britain's top share index closed
0.4 percent higher on Thursday, with energy stocks lifted by
optimism on the economic outlook as central banks kept rates
steady and U.S. data surprised on the upside.
The Bank of England kept rates steady at a record low of 0.5
percent and said it would expand its quantitative easing
programme by 25 billion pounds ($41 billion) to boost Britain's
recession hit economy.
The European Central Bank also kept rates steady.
The FTSE 100 <> closed up 17.75 points at 5,125.64
after gaining 1.4 percent the previous session, shaking off
early weakness and tracking gains on Wall Street.
U.S. data showed a steep rise in productivity and a fall in
applications for job insurance while stronger-than-forecast
results from Cisco Systems <CSCO.O> also lifted the mood.
Energy stocks were the biggest support for the British
index, as crude held above $80 per barrel <CLc1>. BG Group
<BG.L>, BP <BP.L>, Royal Dutch Shell <RDSa.L> and Tullow Oil
<TLW.L> added 0.3-1.9 percent.
British data also boosted sentiment, after manufacturing
output rose faster than expected in September. []
"All the data this week has been pretty good in the U.S. and
the UK, so I think the correction we've seen recently is over
and markets should keep moving back up over the next couple of
weeks," said Graham Secker, UK equity strategist at Morgan
Stanley.
The BoE said indicators such as spending and confidence
suggested a pickup in economic activity may soon be evident.
It also said the considerable stimulus from the past was
still working through the economy. []
Britain's economy contracted in the third quarter, making
the current recession the longest since records began more than
50 years ago.
DEFENSIVES GAIN
Food retailers Tesco <TSCO.L>, J Sainsbury <SBRY.L> and WM
Morrison <MRW.L> added 0.3-2.4 percent, helped by speculation
Dutch grocer Ahold <AHLN.AS> may be about to hit the acquisition
trail, or could become a target itself. The sector was also
lifted by positive results from Delhaize <DELB.BR>.
BT Group <BT.L> added 2.5 percent and Vodafone <VOD.L> rose
1.1 percent, helped by results from Deutsche Telekom <DTEGn.DE>
which showed good growth from its mobile business.
Rentokil Initial <RTO.L> was also among the firmest gainers,
up 2.9 percent after BofA-Merrill Lynch added the support
services group to its business services sector 'most preferred
list'.
The banking sector was the main drag on the index, with
nervousness nagging stocks after a shake-up in the sector
earlier in the week. Barclays <BARC.L>, HSBC <HSBA.L>, Lloyds
Banking Group <LLOY.L>, Royal Bank of Scotland <RBS.L> shed
1.1-3.8 percent.
Standard Chartered <STAN.L> bucked the trend, adding 2.2
percent.
Investors will watch U.S. non-farm payrolls data on Friday
for more clues on the outlook for the global economy.
Among individual fallers, Cable & Wireless <CW.L> took the
biggest tumble, down 6.2 percent, after the telecoms group cut
full-year earnings guidance. []
Invensys <ISYS.L> dropped 3.1 percent as weakness in orders
at its Operations Management division overshadowed a reiteration
that full-year performance would beat last year. []
(Editing by Dan Lalor)
($1 = 0.6053 pound)
