FTSE surges as global data points to tentative recovery

The FTSE 100 Index surged by 2.7 per cent – up 141.19 points to 5366.41 – in a welcome bounce back after volatile trading in recent days due to worries over the recovery.

America's Dow Jones Industrial Average was also striding more than 2 per cent ahead, with better-than-expected data on the US and Chinese manufacturing sectors adding to cheer over upbeat growth news from Australia.

The US manufacturing sector grew faster than expected in August but private employers unexpectedly cut jobs.

The 13th straight month of manufacturing expansion calmed fears that US economy may head back into recession, but the drop in employment and a slump in construction spending to a 10-year low in July kept concerns about slow economic growth alive.

"Our expectation is that we don't have an economic double-dip, though we recognise that the risks of something like that are a lot higher now that we're closer to zero on the growth rate," said Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management in Philadelphia.

"We're in the middle of what is typically a growth scare, where the economic cycle slows down after an initial run-up as stimulus fades and we transition from stimulus to having the economy standing on its own," he said.

Markets across Europe joined in the rebound, with the Cac 40 in France up 3.8 per cent and Germany's Dax closing 2.7 per cent higher.

The positive economic data helped London stocks overcome worse than expected manufacturing figures from the UK – with a survey indicating the pace of growth slowed to a nine-month low in August.

The pound slipped almost a cent against the dollar at one stage before clawing back the ground later on, to stand 0.7 per cent higher at 1.55 dollars. Bid gossip over Thomson Holidays owner TUI Travel and telecoms firm Cable & Wireless Worldwide also added to the investors' cheer in London.

While there was little in the way of corporate news to excite investors, traders seized on the blue-chip bid rumours.

C&W Worldwide was the leading riser, gaining 8 per cent, or 51/8p to 72p, on rumours of interest from US giant AT&T. Shares rose 11 per cent at the height of the gossip.

The telecoms firm was closely followed by TUI Travel, which added 151/8p to 2163/8p, or 8 per cent, on reports that Germany's TUI could be looking to buy the 42.5 per cent share of the business it does not already own.

Beside the bid talk, the best Chinese manufacturing figures for four months boosted metal prices and helped the Footsie's heavily-weighted commodities stocks forge ahead.

With copper prices buoyant, Kazakhmys added 80p to 1236p, while Xstrata was 621/2p better off at 10881/2p.

The gains left just one Footsie stock in negative territory. Randgold Resources was the leading casualty, losing 70p to 6010p, while power transition firm National Grid remained unchanged at 549p as traders bought into racier sectors.

Oil giant BP was an early faller, but moved back into the black later as it announced the sale of some of its Malaysian assets to state-owned Petronas. Shares gained 81/8p to 3883/4p.

In the FTSE 250, fund manager and financial advisory firm Hargreaves Lansdown added 1p to 390p as investors welcomed an 18 per cent rise in full-year profits and a healthy dividend hike.

Elsewhere, car dealership Vertu Motors added 2 per cent or 1/2p to 26.25p as the Newcastle firm raised half-year profit forecasts after buoyant sales of new and used cars in the five months of the year so far.

The biggest Footsie risers were Cable & Wireless Worldwide, TUI Travel and Kazakhmys. The only faller was Randgold Resources.