FTSE100 puts in best day in months amid renewed hopes
THE top share index closed 2.3 per cent higher yesterday, its best gain in three months, as commodity and bank shares rallied on renewed hopes over the gathering pace of the global economic recovery, ahead of the third-quarter US earnings season.
At the close, the FTSE 100 was up 113.65 points at 5137.98, after closing 0.7 per cent higher on Monday.
“The FTSE has had a bumper session today after yesterday’s strong performance in the US… surging higher yet again as optimism returns ahead of the start of earnings season,” said Jimmy Yates, Head of Equities at CMC Markets.
Indices responded to strong signals that the economic recovery was underway in Australia after the Reserve Bank of Australia raised its cash interest rate by 0.25 of a point to 3.25 per cent.
Dollar weakness, following a report Gulf Arab states were in talks to replace the US unit with a basket of currencies in oil trading, underpinned higher metals prices, which boosted the mining sector.
Fresnillo, Antofagasta, Eurasian Natural Resources, Rio Tinto, Kazakhmys and Xstrata put in gains between 6 and 9.9 per cent.
Energy stocks rose as crude prices rose above $71 a barrel, supported by the US Energy Information Administration, which raised its outlook for world oil demand at the end of this year as the economy improves in China and other Asian countries.
Royal Dutch Shell, BP, Tullow Oil and BG Group added between 2.8 per cent and 8.4 per cent.
Banks finished strongly, buoyed by a BofA Merrill Lynch strategy upgrade of the sector to Overweight, with HSBC, Standard Chartered, Barclays, Royal Bank of Scotland and Lloyds Banking Group adding between 1.6 and 4 per cent.
Investors also digested a €4.8bn (£4.4bn) capital raising by French bank Societe Generale to enable it to repay state support and pursue growth opportunities.
A Citigroup upgrade to Buy from Hold helped Rolls-Royce, up 4.4 per cent.
Drugmaker Shire was among a handful of FTSE 100 fallers, off 1.7 per cent, pressured by a UBS downgrade to Neutral from Buy on valuation grounds. GlaxoSmithKline, however, rose 1.4 per cent, boosted by support for its experimental kidney cancer drug Votrient.
Insurers Legal and General and RSA Insurance fell 1.3 and 0.6 per cent respectively, as traders banked profits following recent gains amid M&A speculation.