FTSE ends nearly 2% higher

The FTSE 100 Index pushed nearly 2% higher today as shares were buoyed by healthy economic signs from the Eurozone.

A surprise pick up in Eurozone manufacturing and service sector activity in July for the UK’s biggest trading partner added to recovery hopes and helped the London market add 99.2 points to 5313.8.

UK banks gained ground following strong figures from US counterparts as markets awaited stress test results due from 91 banks across Europe tomorrow.

Wall Street’s Dow Jones Industrial Average also enjoyed gains of almost 2% early on as investors shrugged off falling house sales and rising jobless claims to toast another round of strong earnings from the likes of US firms Caterpillar and AT&T.

This helped the index claw back losses on yesterday’s downbeat testimony from US Federal Reserve chairman Ben Bernanke.

The pound enjoyed a strong day against the dollar – rising to almost 1.53 - although it slipped again to 1.18 against the euro. UK estimates for second quarter GDP could provide another boost to sterling tomorrow.

In London, miners were in demand as base metal prices hit their highest level since the end of May. Kazakhmys was the leading riser in the sector, adding 57p to 1163p or 5%.

Among the banks, Barclays advanced 13.4p to 303.65p, Lloyds Banking Group was up 2.6p to 63.6p, and Standard Chartered was 73p better at 1842p.

The second quarter earnings from Morgan Stanley and Wells Fargo came as welcome relief for the UK sector, which has been under pressure after figures from a raft of US investment banks including Bank of America revealed sharply lower trading revenues.

Sentiment was also good in advance of tomorrow’s details on the European stress tests as some investors bet the results would not be as bad as the market previously feared.

Outsourcing group Capita was also among the winners after it reported a 15% rise in half-year profits and said it expected to benefit from Government spending cuts as public sector clients are forced to offload work to the private sector. Shares jumped 27p to 737p, a rise of 4%.

On the fallers board, shares in software firm Autonomy were 9% lower after its first-half figures failed to please the market. Analysts said the company’s margins were short of hopes, causing shares to plunge 164p to 1649p.

DIY chain Kingfisher managed to overcome early losses seen after a deterioration in the sales trend at its B&Q business in the UK.

It blamed the downturn on the reduced appetite of shoppers for “big ticket” items, although fewer promotions meant an improvement in its margins position. Shares initially fell into the red, but later recovered to stand 1.8p higher at 225.3p.

The biggest Footsie risers were Rolls-Royce up 32p at 611.5p, Invensys up 14.5p at 295p, Kazakhmys ahead 57p at 1163p and Cable & Wireless Worldwide up 3.05p at 68.75p.

The biggest fallers were Autonomy down 164p to 1649p, Imperial Tobacco off 55p at 1853p, African Barrick Gold down 12.5p at 581p and Royal Bank of Scotland down 0.5p to 44.7p.

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