The FTSE 100 ended up 93.26 points, or 1.5 per cent, at 6,506.19 points, its highest close since 14 August 14. The rally was led by miners, telecoms and banks, with the index more than recovering from last week’s loss.
The energy sector was the main faller, down in tandem with oil prices, after US President Barack Obama said at the weekend that any punitive strikes against Syria would wait until lawmakers had a chance to vote.
Mining stocks rose 2.8 per cent – their biggest one-day percentage rise in just under a month – as data showed manufacturing activity growing in top metals consumer China for the first time in months in August.
In Britain, manufacturing accelerated again in August and new orders and output rose at their fastest pace in nearly 20 years.
“The pull-back [on Syria] that we’ve seen from politicians ... has allowed some of that negative sentiment to dissipate. Investors have been able to focus a little bit more on the fundamentals,” Henk Potts, market strategist at Barclays, said.
Vodafone was up 3.4 per cent, adding about 13 points the FTSE, with the telecoms group and its US partner Verizon Communications expected to announce a $130bn (£84bn) deal that will give the US firm complete control of Verizon Wireless.
Trading volume in Vodafone was robust, at around twice its 90-day daily average, against just 81 per cent on the UK benchmark where volume was thin yesterday as the US stock market was shut for a national holiday.
Among the fallers, silver miner Fresnillo was down more than two per cent after a downgrade from UBS.
Analysts said the FTSE 100’s next moves will likely be dictated by Friday’s US jobs report, which will put the focus squarely back on to the debate over when the US Federal Reserve will scale back its huge bond buying programme which has fuelled a rally in world equities over the past year.
“It’s really still all about [stimulus] tapering – it’s so difficult to know how to play it,” Chris Beauchamp, equity analyst at IG Index, said.
“I hate to say it but I think we might have seen a lot of the excitement for the week already, at least until non-farms,” he added.