POSITIVE economic news from across the globe saw a sharp rise in London stocks, with the FTSE jumping above the psychologically-important 6,000 barrier.
It finished the day up almost two per cent at 6,013.87 – its highest close since the start of June 2008.
And US markets also reacted positively after being reassured by the minutes of the Federal Reserve’s December meeting, which showed cautious optimism for the economic outlook. The Dow Jones Industrial Average closed 0.18 per cent higher at 11,691.18 after the announcement.
“With the recent data on production and spending stronger, on balance, than anticipated, the staff revised up its projected increase in real GDP in the near term,” the minutes said.
“Conditions in the labour market appeared to be improving on balance,” the Fed also recognised.
However, the Fed still views progress towards its goals of maximum employment and price stability as “disappointingly slow” and shows no signs of reversing its programme of quantitative easing (QE2).
“While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase programme,” the minutes said Several members said they had a “fairly high threshold for making changes to the programme.”
In the UK, exceptionally strong manufacturing data spurred market sentiment earlier in the day. Economists were predicting a decline in December’s factory activity, but it soared to a 16-year high.
“The manufacturing sector ended 2010 in really good shape and made a healthy contribution to fourth quarter GDP growth,” said Howard Archer of IHS Global Insight, commenting on the purchasing managers’ index (PMI) results.
Economists had expected the winter’s blizzards to hamper the resurgent UK manufacturing sector.
Even the British housing market received some rare good news, as mortgage approvals unexpectedly increased in November to over 48,000, the Bank of England said.
The stockmarket boost came after similar rises on Monday in the US, Europe and Asia, when London was closed for the Bank Holiday.
Meanwhile, US data yesterday showed that American factory orders rose in November, surprising economists who had expected stagnation or even a fall in US manufacturing.
US auto sales were also up in December, reaching their highest level for 16 months – far outperforming Wall Street expectations and indicating a strong recovery in the coming year.
Vehicle sales exceeded 13m in the 12 months to December, closing a year in which car sales rose by 11 per cent -- a strong turnaround for the formerly beleaguered industry.
The stream of positive economic reports came ahead of the publication of the minutes of the Federal Reserve’s (Fed) December meeting.