Good news day helps Footsie rise 2%

LONDON FTSE 100 CLOSE 5,642.50 +114.23

MINING shares, a key swing sector for the stock market, helped power a rally after strong manufacturing data from China and the United States boosted sentiment yesterday.

The FTSE 100 Index, which had slipped to its lowest level in two months on Tuesday, closed up more than 2 per cent, or 114.23 points, at 5,642.5 as latest UK manufacturing data for November also came in far stronger than expected.

Banks were in the ascendant ahead of an expected announcement today from the European Central Bank (ECB) that it will take necessary action to guarantee eurozone financial stability after the bail-outs of Ireland and Greece.

Royal Bank of Scotland and Lloyds Banking Group topped the FTSE 100 risers' board, with 6 per cent rises to 39.88p and 64.05p respectively.

The news was also better stateside. The Dow Jones Industrial Average was 1.7 per cent higher by London's 4.30pm close after figures showed US manufacturing orders increased and private businesses added 93,000 jobs in November.

That US data followed better-than-expected manufacturing figures from China, which showed the latter's resource-hungry boom picked up pace in November and boosted UK mining stocks. Xstrata closed up 5.8 per cent, or 75p, at 1,359.5p, while Kazakhmys jumped 5.3 per cent, or 74p, to 1,462p.

Richard Hunter, head of equities at Hargreaves Lansdown, said: "The better performance was partly due to hopes the ECB will act aggressively, perhaps with some beefed up quantitative easing in the eurozone, to stop the financial contagion of Greece and Ireland spreading.

"The market hopes the ECB will say it will stand behind any future sovereign debt defaulters and has sufficient funding to do it. The UK manufacturing data was also absolutely a boost to sentiment and helped bolster the Footsie."

The FTSE 100 index is 4 per cent up on where it began 2010 after a 21 per cent rise in 2009.The upbeat session provided some welcome breathing space for investors after recent eurozone debt concerns caused government bond yields to rise sharply in countries such as Spain, Italy and Portugal.

Those fears were eased yesterday following a better-than-expected bond auction by Portugal, as its government repeated that it would not need a European Union-led bail-out.

China's strong growth figures proved good timing for Prudential bosses as they met investors in London to outline their plans for Asia, including a target to double the value of last year's operating profits by 2013.

The Pru's shares closed up nearly 5 per cent, or 31p, at 599p, as chief executive Tidjane Thiam said the company aspired to be "one of the winners in the post-financial crisis world".

Other risers included accountancy software firm Sage after it reported a bigger-than-expected 14 per cent rise in annual profits, with its shares closing up 13.47p at 271p.

Amid the greater investor confidence and appetite for risk yesterday, defensive stocks such as utilities eased back. Severn Trent closed down 36p at 1,410p, National Grid fell 15.5p to 552.5p and United Utilities was 7p lower at 589.5p.