The FTSE 100 Index advanced almost 2% today as the International Monetary Fund’s upgrade of global growth prospects boosted sentiment.
Despite a downgrade for the UK’s prospects, the Washington-based body forecasts world growth of 4.5% this year, up from 4.1% in April.
The top flight consolidated yesterday’s rise above the 5000 barrier, cheering a further 90.6 points to 5105.5 as investors rediscovered their risk appetite.
On Wall Street, the Dow Jones Industrial Average was higher after a sharper than expected fall in initial jobless claims in the US last week.
Banks rose after the growth forecasts and hopes that a Europe-wide stress test of major players in the sector will represent the next step in restoring confidence following the financial crisis.
Improved certainty over the eurozone was good for the single currency, which strengthened to 1.19 against sterling. The pound also lost ground against the dollar at 1.51.
Shares in the financial sector were also helped by news of a new venture from City grandees Lord Levene and Sir David Walker which aims to bid for taxpayer-backed assets.
The corporate heavyweights are planning to list an acquisition vehicle on the stock market and have already got investment banks and advisers on board for the move.
Part-nationalised Lloyds Banking Group and Royal Bank of Scotland were beneficiaries, with shares gaining 2.5p to 60.7p and 1.5p to 44.4p respectively. Barclays added 10.4p to 302p.
Temporary power firm Aggreko took top spot after HSBC brokers started coverage with a buy rating and talk of bid interest did the rounds. Shares rose 6% or 83p to 1545p.
Going the other way was supermarket Sainsbury’s, which fell 3.3p to 341p as rumours of Qatari interest in a takeover cooled.
In the FTSE 250, recruitment firm Hays was a strong performer after its first year-on-year growth in net fees for two years. The improvement, which drove shares 4.6p higher to 95.15p, came despite a slump in public sector demand in the UK.
But embattled social housing firm Connaught was suffering in the second tier after it announced changes at the top.
The group said Mark Tincknell will relinquish his role as chief executive with immediate effect to recover from recent health issues, while Stephen Hill has also decided to step down as finance director at the end of October.
Connaught, which has seen its share price slump by almost two thirds in the past two weeks after warning over the impact of the Budget, fell another 6%, down 6.9p to 111.1p.
Elsewhere, retailer JJB Sports was 8% better off – up 1p to 14p – after it revealed that sales soared 22.3% in the six weeks to July 4, despite England’s early exit from the World Cup.
The biggest Footsie risers were Aggreko up 83p to 1545p, Lloyds up 2.5p to 60.7p, Royal Dutch Shell up 64p at 1667p and Legal & General up 3.05p to 83.85p.
The biggest Footsie fallers were Essar Energy down 5.9p to 448.3p, Sainsbury’s down 3.3p at 341p, Randgold Resources off 40p to 6245p and G4S down 1p to 266p.