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FTSE jumps as investors buy into strong US economic signals

by Chris Marshall on Oct 01, 2012 at 17:10

FTSE jumps as investors buy into strong US economic signals

A surprisingly strong report on US manufacturing added to market relief over Friday’s Spanish banking stress test results to encourage investors into global stock markets on Monday.

Britain’s FTSE 100 closed with gains of 78 points to 5,820, a rise of 1.3%. Similar gains were made across other European markets, while the opening bell rang in gains on Wall Street with the S&P 500 and Dow both up around 1% to 1255 and 13592 respectively.

Buoying investors, the ISM manufacturing index moved into positive territory for the first time since May. ‘While one month’s worth of data does not constitute a new trend, the slowdown of manufacturing might have run its course,’ commented an upbeat Bernd Weidensteiner at Commerzbank.

Neither a report showing eurozone unemployement had risen to a record high, nor still-weak eurozone manufacturing surveys (PMIs) failed to dent the mood. The euro was rallying, 0.4% higher to $1.291. Similarly, a weak Chinese PMI manufacturing survey, showing a weaker rebound than expected only added to expectations of market-boosting stimulus from the Chinese authorities.

The relatively manageable shortfall of 60 billion euros shown by Spain’s banking review on Friday removes another hurdle for investors. ‘With the Spanish banking stress test results no longer hanging over markets, the focus has shifted back to stocks and shares,’ said IG analyst Alastair McCaig. Angus Cambell at Capital Spreads said the data had been strong enough for investors to ‘gorge themselves on equities that have recently been heavily sold’.

Among the biggest risers in London, Anglo American (AAL.L) topped the FTSE 100, up 4% to 1889, with other miners making smaller gains.

Xstrata (XTA.L) advanced 2.3% or 22p to 983.9p after the independent directors of the mining giant finally approved the takeover on revised terms by Glencore (GLEN.L).

Xstrata, a Citywire Top Stock, increased the chances of gaining shareholding approval for the deal by allowing investors a separate vote on a controversial £173 million bonus scheme to retain its top executives.

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