FTSE sees surge

The FTSE 100 Index hit its highest level since mid-May today as interest rate worries which have blighted global stock markets for more than a month showed signs of easing.

The Footsie leapt 112.9 points to 5791.5, a rise of 2% as expectations ahead of the US Federal Reserve’s decision on interest rates were for a quarter of a percentage point rise, rather than the half-point hike some had feared.

The Dow Jones Industrial Average also started strongly with gains of around 100 points.

Back in London – where an imminent rise in interest rates looked unlikely after comments to MPs by Bank of England governor Mervyn King – rises in the price of commodities boosted mining and oil stocks.

Geoff Langham, head of trading at CMC Markets, said: “The Footsie saw a strong run throughout the day as fears of an overly aggressive outlook from the Fed started to fade whilst surging gold and oil prices buoyed the respective sectors.”

Miners shot to the top of the blue chip leader board as metal prices rose and interest rate worries eased. Miners normally come under pressure when borrowing costs rise and the impact is felt on world growth.

Vedanta Resources was the day’s biggest riser with gains of 7% or 84p to 1336p and it was followed up by Kazakhmys – 66p higher at 1176p – Xstrata – up 110p to 1988p – and Antofagasta, which ticked up 19.75p to 414.75p.

Insurers were also strong with Friends Provident up 7.5p to 177.75p while Norwich Union owner Aviva put on 20.5p to 762p and Prudential was up 17p at 591.5p.

And drinks giant Diageo turned round early losses to move 5p higher to 915.5p as investors digested its forecast of 6% annual sales growth.

ICI also rose by 4% after it announced the sale of its Uniqema business to smaller UK rival Croda International for £410 million. With the chemicals giant poised to invest the proceeds in other parts of its operation, shares in the company rose 13.25p to 366.5p.

Among mid-cap stocks, Hovis-to-Bisto group RHM cheered investors by revealing the early signs of a turnaround for its Mr Kipling cakes business. Shares were at the top of the FTSE 250 Index risers board with a gain of 8%, or 21.5p to 286p.

Hotels group De Vere was another on the way up, lifting 20p to 866p, after hotels boss Richard Balfour-Lynn improved his takeover offer to 850p a share, or £745.4m (€1bn).

The increase in the share price reflected hopes that private equity firm Permira may emerge with a higher offer after it said it was considering a counter-bid.

The day’s biggest blue chip risers were Vedanta up 84p to 1336p, Kazakhmys 66p higher at 1176p, Xstrata 110p stronger to 1988p and Antofagasta up 19.75p to 414.75p.

The only blue chip fallers were Drax which was off 20.5p to 824p and British Energy, down 2.5p to 671p. BAA was unchanged at 933.5p.