Upbeat economic sentiment boosts FTSE to above 5,000

THE FTSE 100 closed higher yesterday after US Institute for Supply Management non-manufacturing data came in better than forecast, with miners and banks the best performing sectors.<br /><br />The index closed up 35.63 points, or 0.7 per cent, at 5,024.33, after tumbling nearly 60 points on Friday to a near three-week closing low below the 5,000 level.<br /><br />Miners, particularly sensitive to improvement in the economy which heralds increased demand for commodities, added the most points to the index, helped by some positive broker comment.<br /><br />In a sector review, RBS upgraded its base metal price forecasts leading it to raise targets and estimates across the board and upgrade ratings for four firms to &ldquo;buy&rdquo;.<br /><br /><strong>Rio Tinto, BHP Billiton, Antofagasta</strong> and <strong>Vedanta Resources</strong> rose between 1.9 and 3.7 per cent, buoyed by RBS&rsquo;s recommendation upgrades, with the broker saying it expected sovereign wealth funds to be the next &ldquo;predators&rdquo; for the sector.<br /><br />Banks were higher, rebounding after recent falls, led by <strong>Royal Bank of Scotland</strong>, up 4.1 per cent, with <strong>HSBC, Barclays, Lloyds Banking Group</strong> and <strong>Standard Chartered</strong> 0.2 to 1.4 per cent firmer.<br /><br />RBS is set to meet investors this week to tie up the minutiae of a &pound;4bn share placing as talks with the Treasury about joining the toxic loans insurance programme progress. Meanwhile Barclays is thought to entering exclusive talks with insurer Standard Life to negotiate a &pound;250m deal to purchase its banking division.<br /><br />General insurer RSA was a big riser, up 4.3 per cent after talk that it had scrapped plans for a rights issue to fund major M&amp;A and would instead refocus on smaller, bolt-on deals. The shares were also helped by a note from analysts at Cazenove, who reiterated their &ldquo;outperform&rdquo; rating on the stock and argued RSA&rsquo;s valuation is undemanding.<br /><br />The energy sector as a whole was weaker as crude prices fell, with <strong>Royal Dutch Shell </strong>off 0.2 per cent, while <strong>BP</strong> and <strong>Tullow Oil</strong> were flat.<br /><br />UK economic data also showed signs of economic recovery. Britain's service sector expanded at its fastest pace for two years in September and firms were more optimistic about the next 12 months than at any time since April 2007, purchasing managers&rsquo; data showed.