The London market surged more than 4% today as investors banked on an aggressive cut in interest rates later in the week.
Sentiment was also helped after Morgan Stanley said the worst of the bear market was over, encouraging clients to get back into shares.
With a 3% gain for Wall Street’s Dow Jones Industrial Average adding to the mix on US election day, the FTSE 100 Index posted its sixth session of gains in a row, eventually closing 196.2 points higher at 4639.5.
Banking stocks and retailers were higher as calls grew for a full percentage point cut in rates on Thursday. Mining and oil stocks also underpinned the Footsie’s gains as the dollar lost ground against the euro, encouraging traders back into commodities.
High street giant Marks & Spencer made eye-catching gains as investors showed their relief at a lower-than-feared drop in the retail giant’s first-half profits and a pledge to protect the dividend.
M&S’s interim profits fell by a third amid the toughest conditions since the early 1990s, but the 34% profits plunge came in just ahead of City estimates, leaving shares 17p better off at 238.5p.
B&Q owner Kingfisher was another retailer gaining ground, up 7.5p to 129.5p, while Next added 30p to 1125p ahead of its own trading update tomorrow.
Among the banks, Halifax Bank of Scotland enjoyed another winning session after write-downs in line with market hopes yesterday. Shares added 10.6p to 116p, while merger partner Lloyds TSB was 12.25p better at 210p.
Banking giant Royal Bank of Scotland bucked the trend of wider market gains, eventually finishing unchanged at 65.2p it gave a downbeat outlook on trading with more writedowns and caution over full-year figures, which could show a first-ever loss.
The group’s new chief executive hopes to resume dividends in early 2010 with aims to buy back the British government’s £5bn (€6.2bn) preference share stake soon.
The leading Footsie faller however was transport group Stagecoach, which fell 11p to 184.2p, a drop of nearly 6%, as oil prices ticked higher.
It was closely followed by Associated British Foods, down 9.5p at 698p despite a 3% rise in pre-tax profits for the Primark owner.
In the FTSE 250 Punch Taverns endured similar woes after writing off almost £300m (€370m) on its pubs during a difficult year. Shares shed almost 8% or 13.5p to 170p, making it the worst performer in the second tier.
Hovis-to-Branston Pickle firm Premier Foods benefited from the encouraging M&S figures as shares recovered from recent weakness to rise 4.25p to 32.75p.
The interest rate hopes meant Taylor Wimpey shares jumped 2.25p to 16p and Barratt Developments added 1.75p to 87.75p.
The biggest Footsie risers were Kazakhmys up 59.5p at 397.25p, Wood Group ahead 41.75p at 282p, London Stock Exchange up 95p at 656p and Eurasian Natural Resources ahead 58.75p at 408p.
The biggest fallers were Stagecoach down 11p at 184.2p, Associated British Foods off 9.5p at 698p, Cadbury down 4p at 573p and Sage off 1.1p at 177.8p.