Good day for BP buoys the Footsie

BP LED a fresh rally for the FTSE 100 Index yesterday as higher oil prices and the potential resumption of dividend payments cheered investors

Buoyed by the 3 per cent rise for the heavyweight oil stock, London's benchmark index started the new quarter where it left off after its best September in 13 years.

Gains for other commodity stocks and a 5 per cent jump at gas exploration group BG, amid fresh takeover speculation, meant the FTSE 100 index closed 44.28 points higher at 5,592.90.

David Jones, chief market strategist at IG Index, said: "After a strong performance in the third quarter, stock market indices look harder to call for the run to the end of the year.

"They still seem to have a positive bias overall but, after the gains we've seen since the lows in July, it wouldn't be a shock to see a more tentative quarter ahead."

Shares in Edinburgh-based digital CCTV provider IndigoVision continued to rise following full-year results on Wednesday, when the company raised its dividend from 5p to 7.5p.

The stock closed up a further 57.5p or 14.3 per cent at 460p, having peaked at 510p during the session.

The resources sector was lifted by figures pointing to stronger growth in Chinese manufacturing, suggesting the country is not slowing as sharply as feared.

But the economic picture in the United States was more mixed as evidence of weaker activity among industrial firms was offset by data showing a slight improvement in consumer sentiment and spending.

With investors clinging to hopes of recovery, oil prices climbed above $80 a barrel for the first time in six weeks, leading to gains of 31p to 1,888p for Shell and a 34p improvement to 1,308p at Tullow Oil.

Shell has been mentioned as a potential suitor for BG Group, which topped the risers board with a gain of 51.5p to 1,170p.

New chief executive Bob Dudley's first day as BP boss following the departure of Tony Hayward went well as shares rose 12.7p to 440.5p. Investors were encouraged by his comments that BP's board will consider the return of the company's dividend early next year.

The rise came as BP said the clean-up bill for the Gulf of Mexico oil spill now stood at $11.2 billion (7.1bn).

In currency markets, the euro drew encouragement from economic turnaround hopes as it reached a six-month high against the dollar and edged ahead against the pound.

The recent weakness in the dollar, which slipped against sterling yesterday, has been an upward factor in crude prices as it makes oil cheaper for buyers in other currencies.

The wider market will be tested in the coming weeks as the third quarter earnings season looms in the United States and the UK. Marks & Spencer, which is due to post a trading update next week, rose 3.5p to 391.6p and supermarket Tesco lifted 4.1p to 428.1p ahead of half-year results on Tuesday.In a quiet session for corporate news, claims handling firm Helphire was up 2p to 39p, after a return to profit in the year to 30 June.

The surplus of 392,000 compared with losses of 149 million a year earlier.