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BoE Stimulus Sledgehammer Lifts World Stocks, UK Shares Hit 1-Year High

The Bank of England's stimulus plan lifted British equities to one-year highs on Friday, while world stocks inched up and sterling recouped some of its losses after tumbling to a one-week low.

Acting on its chief economist's wish to use "a sledgehammer to crack a nut", the BoE cut interest rates to next to nothing and unleashed billions of pounds of stimulus to cushion against the impact of Britain's vote to exit the European Union.

The moves pushed sterling 1.6 percent lower against the dollar on Thursday, while British government bond yields hit record lows and shares rose 1.6 percent.

The main FTSE 100 index extended those gains, rising another half percent to its highest level since July 2015. MSCI's world equity index rose for a second day, while emerging equities jumped 1 percent, approaching one-year highs.

The pan-European STOXX600 index was up 0.5 percent.

"(Markets) are infatuated with QE. We are all buying the market purely on the fact that more money is going to flood into markets, depressing bond yields and increasing the value of risk assets such as equities," said Peter Lowman, chief investment officer at wealth manager Investment Quorum in London.

MSCI's broadest index of Asia-Pacific shares outside Japan extended gains to 1.1 percent, and were headed for a 0.8 percent weekly gain.

But Japan's Nikkei surrendered its earlier gains to close flat. It fell 1.9 percent in a week marked by investor disappointment over the new stimulus measures announced by the country's central bank and government.

The share markets gained despite warnings from BoE governor Mark Carney of a further likely downturn in the UK economy, and despite relatively weak corporate earnings and subdued economic growth indicators in most parts of the world.

Britain's Royal Bank of Scotland, for instance, reported widening first-half losses, sending its shares down 4.5 percent.

German data on Friday showed an unexpected fall in June industrial orders from the European powerhouse, and oil prices stumbled again, falling 1 percent on fresh signs of weakening demand from China .

"It's obvious the world is now buying central banks rather than the fundamentals attached to the economies," Lowman said.

Sterling climbed 0.2 percent against the dollar after Thursday's sharp fall . It stands around 2.7 percent off the three-decade lows hit in the days after the Brexit vote.

British government bond yields also inched off record lows , and German yields rose after a 5 basis-point tumble following the BOE move.

Markets will focus on U.S. non-farm payrolls data due at 1230 GMT. A Reuters poll predicts the world's largest economy added 180,000 jobs in July.

Coming a week after surprisingly tepid U.S. second-quarter growth numbers, the data will be scrutinized by markets eager to gauge the likely timing of the next U.S. rate rise.

The dollar was flat against a basket of currencies, having fallen 2 percent last week after the poor growth numbers - its worst showing since April .

A strong jobs reading may help the dollar by reviving expectations of a rate hike by year-end.

Stock futures indicated a firmer opening for Wall Street, with so-called e-minis for the Dow Jones, S&P500 and Nasdaq up around a quarter percent each.