The FTSE 100 was trading as much as 1% higher than Wednesday’s close of 6,630, its worst finish since 18 October when it finished at 6,622.58.

As speculation about an gradual withdrawal of US stimulus continues to ramp up following last week’s stronger-than-expected jobs data, Janet Yellen said that the labour market and wider economy are performing “far short of their potential” with unemployment still too high.

In prepared remarks ahead of a hearing in front of Congress later today, Yellen, who is expected to take over from Ben Bernanke as head of the Fed in January, said that the Fed has “more work to do” to help the recovery, easing fears that a taper of quantitative easing is just around the corner.

The Dow Jones Industrial Average and S&P 500 on Wall Street both raced to new record highs following the comments on Wednesday evening.

“Yellen’s comments last night made clear her view that record stimulus measures should only be tapered after a sustained recovery, encouraging bullish investors who fear that any reduction in stimulus will trigger a sell-off,” said Max Cohen from Spreadex.

In other news, German gross domestic product (GDP) growth slowed to just 0.3% in the third quarter from a rate of 0.7% in the second quarter, though this was in line with consensus estimates. The Federal Statistics Office Destatis said that the slowdown was due to weak external demand.

French GDP meanwhile, contracted by 0.1% quarter-on-quarter, down from 0.5% growth in the second quarter and slightly below analysts’ forecasts for a flat reading.

Burberry’s first-half revenues reach new high

Burberry’s share price was higher this morning after the luxury fashion company said that first-half revenues exceeded £1bn for the first time on the back of strong growth in retail.

Supermarket group Sainsbury was a high riser this morning as investors continued to celebrate the company’s better-than-expected first-half results yesterday. The stock was benefitting from a raft of broker upgrades this morning from HBSC, Exane BNP Paribas and Citigroup who all lifted their ratings on the stock and raised target prices.

In contrast, sector peer Tesco was being pressured lower by a Goldman Sachs downgrade to ‘sell’, with the bank saying that investors “still have some time to wait before a cash return programme (buyback of special dividends) can be instigated”.

British Gas-owner Centrica was also down after warning that market conditions remained challenging, particularly in business energy supply in both the UK and the US, in UK gas-fired power generation and in UK gas storage. The company said it expects 2013 adjusted earnings to be flat on last year.

Consumer packaging company Rexam fell after saying trading since the start of July. Sentiment still seems fragile following the company’s profit warning in June.

Oil and gas group Ophir Energy surged after announcing the sale of a 20% interest in three blocks in Tanzania to Pavilion Energy for a maximum of $1.3bn.

Digital sports media firm Perform, however, dropped sharply after saying that earnings would be lower than expected this year.

Source: ShareCast