City advances as mining stock gains lift sentiment

The Footsie joined stock markets worldwide in leaping higher on the news, which promises to give a welcome boost to the global economy.

London's FTSE 100 closed 48.27 points higher at 5299.11, while the Dow Jones Industrial Average was more than 100 points up within the first few hours of trading.

But US stocks were off session highs in early afternoon. The S&P 500 was up more than 8 per cent in the past 10 trading days, leaving the market vulnerable from a technical perspective.

"The market is very stretched on a near-term basis," said John Schlitz, chief market technician at Instinet in New York.

"From a trading perspective it's too late to chase this move."

Across Europe, the Cac 40 in France added 1.3 per cent and German's Dax closed up 1.2 per cent.

Mining stocks were the biggest driver, amid hopes for export markets from China's currency decision.

Wall Street in particular welcomed Beijing's surprise proposal to determine its exchange rate from multiple currencies, which could provide a boost to US manufacturers.

Asian markets had already set the pace for the day's trading session, with the Hang Seng closing 3 per cent higher in Hong Kong and Japan's Nikkei index up 2 per cent.

The yuan has been pegged to the US dollar since the global financial crisis took hold in 2008, causing friction with countries that say it is undervalued for China's own benefit.

Yesterday's decision raised expectations of a boost to crude imports by China, causing oil prices to rise by more than 1 per cent to around 78 US dollars a barrel.

This was positive news for Royal Dutch Shell, which climbed 33p to 1784p, but BP continued to struggle after it was reported the beleaguered oil giant planned to raise 50 billion US dollars (33.7bn) to cover the cost of the Gulf of Mexico oil spill.

On the day that BP's first quarter dividend should have been paid to shareholders, the stock slipped another 2 per cent, or 8p to close at 3491/2p.

With investors treating the China currency move as a sign of increased confidence in the country's economy, mining stocks dominated the risers' board with Vedanta Resources up 6 per cent, or 140p to 2471p, and Rio Tinto 165p higher at 3490p.

The flight to risk meant utility stocks were out of favour, with United Utilities down 91/2p to 5291/2p and Severn Trent off 14p to 1228p.

Marks & Spencer's strong run of recent sessions also came to an end following a drop of 87/8p to 3423/4p.

B&Q owner Kingfisher dropped 13/4p to 228p.

Elsewhere, shares in Supernanny television producer Shed Media closed 6 per cent higher, up 41/2p to 821/2p, after it confirmed it was the subject of takeover interest from US media giant Time Warner.

Shed revealed two weeks ago that previous suitors Bowmark Capital and Darwin Private Equity had walked away from backing a management buyout, but said it had received another approach.

It is understood Time Warner – the group behind blockbusters such as Sex and the City – wants to add Shed to a recently formed London-based production unit.

The four biggest Footsie risers of the day were Vedanta Resources, Rio Tinto, Antofagasta up 431/2p to 921p and Xstrata ahead 49p to 1076p.