Bargain hunting pushes FTSE up 3%

The FTSE 100 roared 3 per cent ahead as investors looking for bargains in the mining sector pushed the market higher.

Metal prices rose as the impact of a deluge of poor economic news faded and traders decided that hard-hit commodities looked over-sold.

The FTSE 100 finished 2.9 per cent or 141.47 points up at 4,965 - the highest close in more than a week.

Across the Atlantic, the Dow Jones Industrial Average was 1.4 per cent ahead in early trading after being closed on Monday for the holiday weekend as investors looked past signs of slowing growth among US services firms.

Michael Hewson, analyst at CMC Markets, said: "With not much in the way of data before tomorrow's weekly jobless claims, there should be little in the way of negative sentiment to derail what looks like, on the face of it, a technical rebound."

A meeting of the Reserve Bank of Australia, which left rates unchanged at 4.5 per cent, was seized upon by investors across the globe as a green light to pile back into equities after the statement from the meeting issued an upbeat outlook for the Australian economy as well as for future growth in China and Latin America. Overseas markets, including the FTSE, rose as a result.

"It's amazing what a difference a few well chosen words can make," added Hewson.

With just a handful of top-flight stocks in negative territory, the FTSE risers board was yesterday led by miner Antofagasta, which cheered 57.5p or 7 per cent to 818.5p, helped by the better sentiment.

BP, meanwhile, enjoyed its second positive session in a row with a gain of 12.2p to 345.5p - a rise of almost 4 per cent. This followed Royal Bank of Scotland's decision to upgrade the stock from "hold" to "buy" and after the oil company insisted it would be able to meet the cost of the Gulf of Mexico oil spill without issuing new shares.

The positive session extended to banking stocks, with Barclays up 15.4p at 274.6p and RBS up 1.95p to 40.9p.

Housebuilders were in positive territory in the FTSE 250 Index after Persimmon reported a 25 per cent rise in half-year turnover and said sales had returned to more normal levels since George Osborne's austerity Budget.

Charles Church owner Persimmon jumped 6 per cent or 21.7p to 370.2p, while Barratt Developments was 5p higher at 98.9p.

Online gambling group PartyGaming also enjoyed a sharp rise after casino revenues grew despite the football World Cup.

Sales grew 6 per cent in the first quarter of 2010 - helping shares rise 5 per cent, or 10.7p to 231.5p - despite tougher conditions for its poker arm.

But fellow FTSE 250 stock N Brown, the home shopping firm, was nearly 5 per cent lower with a 11.8p fall to 243.1p after it said like-for-like sales growth had slowed to 0.1 per cent as consumer caution hit spending.

Elsewhere, educational software supplier RM was 1 per cent off after revealing that the UK government's decision to axe its school rebuilding scheme would put 200 million of projects at risk.

RM's shares finished 2p off at 160p.z