A disappointing US jobs report suggested that momentum in the world's top economy had already started to slow in September. With October numbers likely to be negatively affected by a two-week government shutdown, that bolstered expectations the Fed will wait until next year before starting to scale back its quantitative easing (QE).
“Good news is good news because it means the economy is getting better, but bad news is almost good news because it means you are not going to get any tapering of QE,” said Colin Morton, fund manager at Franklin Templeton. “I know that can’t always be the case but that’s certainly how the market is feeling at the moment.”
The FTSE 100 closed up 41.46 points, or 0.6 per cent, at 6,695.66 points, notching up its highest finish since late May after extending gains sharply following the non-farm payrolls report and a strong start on Wall Street.
Consumer goods group Reckitt Benckiser gave the biggest boost to the FTSE 100, its shares up 5.2 per cent after solid third-quarter sales prompted a rise in full year guidance. The firm said a recovery in developed markets had offset some weakness in emerging economies.
Investors also welcomed news that Reckitt may sell its pharmaceuticals unit to focus on consumer and household goods.
Also encouraging on the earnings front, car and plane parts maker GKN said growth in civil aviation had compensated for a sluggish military market. And Whitbread, Britain’s biggest hotel and coffee shop operator, announced stronger sales helped by improving consumer demand for coffee and hotel rooms.
“I think there may still be some disappointments in this quarter given what's happened in emerging markets, but generally the numbers coming out have been good and we are still fully invested and I am still pretty positive on markets,” said Colin McLean, managing director at SVM Asset Management.
Another top riser, global mining company BHP Billiton, climbed 4.1 per cent after upgrading its iron ore production target in what analysts at Morgan Stanley called a “very solid” update.