FTSE rallies nervously on US hopes

The London market continued its nervous rally yesterday after sentiment was boosted by better than expected economic data from the United States and the hope of more quantitative easing from the Fed.

The Footsie struggled to make gains in earlier trading until the US commerce department reported a surprise 4 per cent surge in demand for long-lasting manufactured goods, such as cars and planes, in July.

The FTSE 100 Index rose 76.43 points or 1.5 per cent to 5,205.85, while the Dow Jones Industrial Average made slight gains in early trading after surging ahead 3 per cent on Tuesday.

Will Hedden, sales trader at IG Index, said: “After seeing the markets in the US move up the night before, very much on the feeling that [Federal Reserve chairman] Ben Bernanke will allude to QE3 on Friday, UK trading has been partly influenced by some big individual movers.”

Man Group was up 10 per cent to 216.1p after an upgrade from HSBC, while Tullow Oil gained more than 8 per cent to close at 1,026p after announcing a 312 per cent jump in pre-tax profits in the six months to 30 June, to $540 million (£324m).

The company doubled its dividend and said it expected to conclude a long-awaited deal in Uganda in September, opening the way for a $10 billion development.

Banks, whose shares have been pummelled in recent weeks as a result of the eurozone debt crisis, were among the sectors staging a recovery, with taxpayer backed Royal Bank of Scotland up 9 per cent, or 1.9p to 21.9p, and Lloyds ahead 1.8p at 30.1p.

The pound was down against the euro and the dollar at €1.14 and $1.64 respectively, while gold continued to fall from its recent record highs, to $1,785.

Among corporate results, car insurer Admiral was the biggest faller in the top flight, down 12 per cent, despite posting half-year profits of £160.6m, a rise of 27 per cent.

While the figures were in line with expectations, Admiral’s warning that injury claims and their related costs continued to rise in the UK prompted a sell-off for shares. The stock dropped 182p to 1,353p, which took some of the shine off the award of a £1,500 shares bonus for 5,700 Admiral staff.

Other fallers included outsourcing firm Serco after a 10 per cent rise in half-year profits to £111.8m was offset by its warning over continued headwinds in its UK and US markets. Shares were off 21p at 511p.

Advertising giant WPP was among the top risers after it said its sales and profits have returned to levels seen before the 2008 crash of Lehman Brothers.

Its boss Sir Martin Sorrell said the group did better than expected in the first six months of 2011 as revenues ploughed ahead by 6.1 per cent to £4.7bn. Shares were up 7 per cent, or 43p at 623p, despite Sorrell warning of storm clouds ahead and saying the firm had yet to see how the latest stock market crisis affected its clients.

Among the Scottish stocks, Faroe Petroleum saw shares jump 15 per cent after announcing it had struck oil at a prospect west of the Shetlands. Shares gained 21p to close at 159p.

Fellow explorer Cairn Energy was up 7.1p to 301p as the sector moved higher.