THE FTSE 100 share index closed above 5,000 yesterday, for the first time in nearly a year, fuelled by the return of mega-mergers and optimism for economic recovery<br /><br />The large-cap index breached the psychologically important level in early afternoon and, despite some wavering, closed up by 1.2 per cent at 5,004.30.<br /><br />This week so far has seen a four-day rally, buoyed by an increased amount of corporate activity – including Kraft’s £10.2bn bid for Cadbury and the announcement of a merger between Orange and T-Mobile UK – and hopes that the recession could be coming to an end. But some in the City had doubted that the 5,000 rally could be reached, amid profit-taking and higher trading volumes.<br /><br />“There has been a great run since March and a lot of people have said we have reached a top, that September is usually a terrible month,” said Capital Spread head of sales, Angus Campbell. “But it seems like a lot of investors are taking a contrarian view. The bulls have taken control and are winning the battle.”<br /><br />Rising crude oil prices and strong banking stocks helped support the gains in equities, as well as a renewed interest in the travel sector.<br /><br />“I think the market could run up to the final quarter of the year with a positive bias, but the end of September could be a time for reflection. But there are no glaring indications that investors are about to turn defensive,” added Campbell.<br /><br />The index has rebounded 45 per cent since hitting a floor of 3,529.86 on 6 March, but remains around eight per cent below its level prior to the collapse of Lehman Brothers.<br /><br />The new landmark of 5,000 has been reached within days of the one-year anniversary of Lehman Bros filing for bankruptcy, an event that sent shockwaves through the global financial system.<br /><br />Since then the government has bailed out Lloyds Banking Group and Royal Bank of Scotland, nationalised Northern Rock and ploughed money back into the system through its £175bn quantitative easing scheme.<br /><br />There have been increasing signs that the recession could be coming to an end. On Tuesday the National Institute of Economic and Social Research (NIESR) said that gross national product (GDP) rose by an estimated 0.2 per cent in the three months to August, the first rise over a quarterly period since May 2008.<br /><br />And figures out yesterday showed exports rose in July at their fastest monthly pace since the start of 2008.