THE FTSE 100 ended 2 per cent, or 88.25 points, higher yesterday at 4,506.19 as some unusually upbeat data saw optimism about the global economy rise.
Mining stocks led the charge, as metal prices firmed, bolstered by hopes for increased demand particularly following bullish Chinese data.
China’s official purchasing managers index for May stayed above 50, the level which separates contraction from expansion, for a third straight month. Xstrata, Vedanta Resources, Anglo American, Lonmin, BHP Billiton and Rio Tinto gained between 5.3 to 9 per cent.
Data closer to home also showed signs the economic slump may be easing.
The UK manufacturing sector contracted at its slowest pace in a year in May, although the market was expecting a healthier reading.
Crude oil prices pushed to a seven-month high, sending shares in BP, Royal Dutch Shell and BG Group up 1.7 to 2.7 per cent.
Between them, miners and petrochemicals added 50 points to the large cap index.
Banks rallied after recent falls, with Barclays, Royal Bank of Scotland, Standard Chartered and Lloyds Banking Group up 1.0 to 6.6 per cent.
But HSBC missed out, losing 0.8 per cent, after the Saudi central bank ordered domestic lenders to freeze bank accounts of businessman Maan al-Sanea, one of the country’s wealthiest businessmen and recently a big shareholder in HSBC.
Speculation on the market that Persimmon was considering a rights issue did little to hurt the share price. The property developer gained 5 per cent to close at 17.75p – but later told CityA.M. that it had no intention of tapping the market for cash.
Life insurers and other financials rose, with Legal & General up 7.8 per cent, Old Mutual ahead 7.0 per cent and Man Group up 5.9 per cent.
Non-life insurers were weak, however, with blue chip Amlin and mid-cap peers Catlin and Novae Group down 2.0 to 5.6 per cent as Numis downgraded all three stocks in a sector review, cutting estimates and targets across the board due to the impact of dollar weakness on US profit.
Defensive issues were unwanted as investors’ risk appetite returned, with gas distributor Centrica the top FTSE 100 faller, down 3.5 per cent, while power generator Drax lost 1.8 per cent, contract caterer Compass Group fell 2.2 per cent, and food retailer Tesco lost 1.5 per cent.