The London market marched ahead today as new banking regulations and reassuring Chinese data whetted investors’ appetite for risk.
The FTSE 100 Index closed 63 points up at 5565.5 points, while in the US the mood was much the same, with the Dow Jones Industrial Average nearly 1% ahead.
Stock markets had earlier been put on the front foot after new rules on bank reserves and strong economic data in China lifted banking and mining stocks.
The data saw the pound up against the US dollar at 1.54, but it was down against the euro at 1.19, which is more likely to benefit from strong Chinese growth.
Industrial production in China bounced back from a slowdown in July to grow by 13.9% in August when much of the market had expected another slowdown.
The potential of greater Chinese demand boosted the mining industry, with copper firm Kazakhmys soaring to the top of the Footsie, after its shares lifted 5%, or 67p at 1352p.
Metals company Vedanta Resources was not far behind with shares up 3% or 71p to 2109p, while Xstrata was ahead 34.5p to 1170p.
Royal Bank of Scotland and Lloyds Banking Group were both higher, up 1.1p at 49.6p and 1.9p to 77.6p respectively, as analysts said UK banks were well positioned in the wake of Basel rules for minimum capital ratio requirements.
Traders piled into Prudential, which jumped 4% at one stage, on speculation of potential takeover interest in the UK insurer from a group of Chinese investors.
The billionaire entrepreneurs had wanted to throw their weight behind the Pru’s failed takeover bid for the AIG division AIA, but are now in the early stages of considering a deal to take control of Prudential’s Asian business, according to the Sunday Times. Pru shares lifted 18.5p to 618p.
BAE Systems was also looking strong after the defence giant hired advisers to help it consider the sale of its US-based platform solutions division. With a deal set to raise as much as £1.3bn (€1.55bn) for the UK firm, shares were 10.2p higher at 333.1p.
Primark parent Associated British Foods sank to the bottom of the FTSE 100, after it warned that increases in its costs and looming VAT changes would put retail margins under pressure next year.
AB Foods is also fighting against soaring wheat prices at its food arm, which includes Kingsmill and Allinson bread company Allied Bakeries.
Despite forecasting full-year sales and profits at the budget clothing group to be “well ahead”, shares fell more than 1% or 16p to 1072p.
Outside the top flight, stocks in mobile phone chip manufacturer CSR soared after it announced a share buyback programme of up to $50m (€39m), sending it to the top of FTSE 250 risers board. Shares at the Cambridge-based firm were up 35.2p to 351p.
The biggest Footsie risers were Kazakhmys, up 67p to 1352p, Wolseley, ahead 69p to 1450p, Vedanta Resources, up 71p to 2109p, and Anglo American, ahead 81p to 2587p.
The biggest fallers were Associated British Foods, down 16p to 1072p, TUI Travel, off 3.1p to 225.9p, Aggreko, down 10p to 1539p, and Bunzl, off 4.5p to 749.5p.