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FTSE gains on commodities rally after price of oil rises

THE FTSE 100 closed 2.2 per cent higher yesterday, fuelled by a rise in the oil price which prompted a strong rally in commodity stocks, and on hopes that the recession may be drawing to a close. The index was up 91.50 points at 4,340.71, after closing 1 per cent lower on Tuesday.<br /><br />&ldquo;When (the oil price) rallies, I think people begin to get a little bit confident that demand is growing and therefore hopefully (global) economies are going to start turning around, and that&rsquo;s why we&rsquo;re seeing the rally in the markets,&rdquo; said Mark Priest, senior equities trader at ETX Capital.<br /><br />Oil majors added the most points to the large cap index, holding on to gains despite crude prices reversing earlier gains and falling below $70 a barrel after US government data showed increases in US fuel inventories. <br /><br /><strong>BP, Royal Dutch Shell, BG Group, Tullow Oil</strong> and <strong>Cairn Energy</strong> rose between 0.4 and 4.2 per cent.<br /><br />Miners rose in sympathy, with <strong>Eurasian Natural Resources, Antofagasta, Xstrata, Kazakhmys</strong> and <strong>BHP Billiton</strong> adding 4.5 to 6.3 per cent, amid metal price strength.<br /><br /><strong>Vedanta Resources</strong> was the biggest blue-chip riser, up 9.9 per cent, after news the India-focused mining group has boosted the size of its share buy-back programme by 40 per cent to $350m (&pound;212m).<br /><br />Hopes that Britain&rsquo;s economy is emerging from recession got a boost from data which showed less of a decline in services and manufacturing activity, though doubts remain about the durability of any recovery. <br /><br /><strong>International Power</strong> grabbed the second spot on the FTSE 100 leaderboard, up 6.6 per cent after news the British utility is selling its Czech business to the Czech-Slovak investment firm J&amp;T Group for &pound;581m after costs, helping calm worries over its debt. Peer <strong>National Grid</strong> gained 1.37 per cent.<br /><br />Elsewhere, <strong>Marks &amp; Spencer</strong> added 3.8 per cent as analysts nudged up their full-year profit forecasts for the high street retailer after it posted a smaller than expected decline in first-quarter underlying sales. <br /><br />Peer <strong>Next</strong> was also firmer, climbing 3.9 per cent.<br /><br />Banks were broadly higher, as the risk sensitive stocks responded well to increased investor confidence.<br /><br /><strong>Barclays, HSBC, Standard Chartered</strong> and <strong>Royal Bank of Scotland</strong> rose 1.4 to 3.5 per cent.<br /><br />On the downside, <strong>Man Group</strong> shed 5.6 per cent after going ex-dividend.