FTSE surges as US figures boost investor confidence

The FTSE 100 Index surged 1.4 per cent yesterday as investors were cheered by decent economic news and corporate results from across the Atlantic.

The Dow Jones Industrial Average gained more than 1 per cent early on after strong numbers from the likes of Asda owner Wal-Mart and Home Depot, as well as a bigger than expected leap in industrial production.

This left London's blue-chips up 74.45 points at 5350.55 as UK inflation – which fell to 3.1 per cent in July – also failed to spring any unpleasant surprises.

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The pound saw a weaker day, falling below 1.21 euros and 1.56 against the dollar.

Commentators cited relief at successful bond auctions by the Irish and Spanish governments boosting the single currency, while the greenback was helped by the stronger industrial data.

Industrial output in the US jumped 1 per cent last month after slipping 0.1 per cent in June, the Federal Reserve said.

Output gains were seen across the board, with automotive products surging 8.8 per cent.

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Another report showed US prices paid at the farm and factory gate rose 0.2 per cent last month, pulled by higher prices for food and consumer goods, the Labor Department said.

The increase, which was in line with market expectations, was the first advance in producer prices in four months.

Core producer prices, which strip out energy and food costs, increased 0.3 per cent from June.

In London insurers again caught the eye with gains of more than 5 per cent for both Aviva and Prudential. Aviva added 193/8p to 3971/4p after Citigroup raised its price target on the stock and investors refused to rule out further developments in RSA's pursuit of the company's general insurance business.

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Aviva has dismissed the 5bn approach but RSA said it remained open to talks after gathering the support of three major banks for a rights issue.

Buy-out group Resolution fuelled the speculation by revealing it planned further deals to add to the acquisitions of Friends Provident and Axa's UK life and pensions business.

One scenario being mulled by analysts involves Aviva's life assurance operation being taken on by Resolution, should RSA be successful in buying the general insurance division.

Resolution announced strong half-year figures from Friends Provident during yesterday's session, with sales up 42 per cent to 458m and profits sharply higher at 157m.

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Elsewhere, Prudential cheered 281/2p to 5831/2p as analysts at ratings agency Standard & Poor's praised the firm's strong recent financial performance.

Meanwhile, a rise in commodity prices helped stocks in the mining sector.

Lonmin led the way, gaining 88p to 1582p to claim the Footsie's yellow jersey.

Other notable risers in London included British Airways, which improved 5p to 2211/4p after airports operator BAA and the Unite union reached a deal to avoid strike action at major UK airports later this month.

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Outside the top flight, shares in building services firm Rok rose 6 per cent – or 11/4p to 201/2p – after it maintained its half-year dividend and said it expected a better performance in the second half of 2010.

The optimism came despite recent operational difficulties at its plumbing division, which left the company with half-year losses of 3.8m.

Rival firm Connaught, which is in the grips of a financial crisis, fell 3/4p to 15p amid continued turbulence in the FTSE 250 Index stock.

The biggest Footsie risers were Lonmin, Prudential, Aviva and Xstrata up 451/2p to 10591/2p.

The biggest Footsie fallers were BHP Billiton down 461/2p to 1916p, Cairn Energy off 63/4p to 4863/8p and International Power down 2p to 3623/4p.

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