London hits new 10-month high

London’s blue chip share index powered on to a new 10-month high today as its 25-year record-breaking summer rally showed no sign of slowing.

The FTSE 100 Index closed 45.3 points higher at 4896.2 – having briefly passed the 4900 mark earlier in the session – on increased optimism over the global economy.

Stock markets around the world also basked in the cheery sentiment, driven by Friday’s comments from US Federal Reserve chairman Ben Bernanke that America was close to pulling out of recession.

Confidence was further boosted by the recent news of a better-than-expected rise in US home sales last month that helped relieve some of the fears over American consumers that have limited market gains.

The Dow Jones Industrial Average was 0.7% higher in early trade, while indices across Europe were also enjoying strong gains.

The Cac 40 in France rose more than 1%, while Germany’s Dax lifted 0.8%.

Meanwhile, oil was trading at nearly $75 a barrel as the stock market surge and economic optimism took effect.

While commentators said the London market was enjoying its biggest summer equity rally since the FTSE 100 was launched in 1984, they warned the gains were built on slim dealing volumes and would be tested in busier times next month.

Miners drove much of today’s top-flight rally, with rises of as much as 6% in the case of Kazakhmys, which lifted 53.5p to 980p.

The part-nationalised banks were also on the march amid improved sentiment. Royal Bank of Scotland was the Footsie’s leading winner, adding 7%, or 3.27p, to 51.75p and Lloyds Banking Group cheered 6.39p to 107.97p.

Advertising and PR group WPP rose by 4% after a broker upgrade from Deutsche Bank eased the nerves of investors amid fears the company will downgrade its forecasts in interim results due later this week.

Shares were 19p higher at 523.5p.

Packaging firm Bunzl was another big gainer with a 4% lift – up 24.5p to 576.5p - after it reported a 4% rise in half-year profits and said margins improved in most of its major markets.

Another riser was engineering and construction firm Balfour Beatty, which added 10.5p to 352.7p after announcing it had been selected for a $415m (€289m) road project in Texas.

Security group G4S also hailed its robust performance following half-year results, but the company failed to get a boost after analysts said bottom-line profits were slightly below expectations. Its shares were the worst performing on the FTSE 100 Index fallers board after a drop of 4%, or 7.9p, to 216.2p.

The biggest Footsie risers were Royal Bank of Scotland up 3.27p at 51.75p, Lloyds Banking Group ahead 6.39p at 107.97p, Kazakhmys up 53.5p at 980p and Eurasian Natural Resources up 45p at 896.5p.

The biggest Footsie fallers were G4S down 7.9p at 216.2p, BG Group off 21p at 1050p, Kingfisher down 3.2p at 211.1p and GlaxoSmithKline down 15.5p at 1202.5p.