City in black as upbeat data from Eurozone lifts market

A surprise pick-up in Eurozone manufacturing and service sector activity in July for the UK's biggest trading partner added to recovery hopes and helped the London market add 99.17 points to 5313.81.

UK banks gained ground following strong figures from US counterparts as markets awaited stress test results due from 91 banks across Europe today.

Wall Street's Dow Jones Industrial Average also enjoyed gains of almost 2 per cent early on as investors shrugged off falling house sales and rising jobless claims to toast another round of strong earnings from the likes of US firm Caterpillar.

This helped the index claw back its losses on Wednesday's downbeat testimony from US Federal Reserve chairman Ben Bernanke.

Caterpillar gained 2.1 per cent to $68.33 after reporting a better-than-expected profit and raising its outlook, citing strong growth in emerging markets.

Profit jumped 43 per cent at diversified manufacturer 3M on strong demand in emerging markets. The stock rose 3 per cent to $84.74 and was the top boost on the Dow.

Package deliverer United Parcel Service, considered an economic bellwether, advanced 6.5 per cent to $63.93 after its profit rose sharply and it raised its full-year outlook.

The pound enjoyed a strong day against the dollar – rising to almost 1.53 – although it slipped again to 1.18 against the euro. UK estimates for second quarter GDP could provide another boost to sterling today.

In London, miners were in demand as base metal prices hit their highest level since the end of May. Kazakhmys was the leading riser in the sector, adding 57p to 1163p, or 5 per cent.

Among the banks, Barclays advanced 133/8p to 3035/8p, Lloyds Banking Group was up 25/8p to 635/8p, and Standard Chartered was 73p better to stand at 1842p.

The second quarter earnings from Morgan Stanley and Wells Fargo came as welcome relief for the UK sector, which has been under pressure after figures from a raft of US investment banks including Bank of America revealed lower trading revenues. Sentiment was also good in advance of today's details on the European stress tests as some investors bet the results would not be as bad as the market previously feared.

Outsourcing group Capita was also among the winners after it reported a 15 per cent rise in half-year profits and said it expected to benefit from Government spending cuts as public sector clients are forced to offload work to the private sector.

Shares jumped 27p to 737p, a rise of 4 per cent.

On the fallers' board, shares in software firm Autonomy were 9 per cent lower after its first-half figures failed to please the market.

Analysts said the company's margins were short of hopes, causing shares to plunge 164p to stand at 1649p.

Kingfisher managed to overcome early losses seen after a deterioration in the sales trend at its B&Q business in the UK.

It blamed the downturn on the reduced appetite of shoppers for 'big ticket' items, although fewer promotions meant an improvement in its margins position.

Shares initially fell into the red, but later recovered to stand 13/4p higher at 2251/4p.

The biggest Footsie risers were Rolls-Royce up 32p to 6111/2p, Invensys ahead 141/2p to 295p, Kazakhmys and Cable & Wireless Worldwide ahead 3p to 683/4p.

The biggest fallers of the session were Autonomy and Imperial Tobacco off 55p to stand at 1853p.