Global market rally pushes City above 5600 benchmark

The FTSE 100 Index advanced 94.09 points higher to stand at 5602.54 – up 1.7 per cent – marking its first close above 5600 since the end of April.

Wall Street's Dow Jones Industrial Average rose more than 100 points, with similar gains across Europe as the Cac 40 in France closed up 1.8 per cent and Germany's Dax finished 1.4 per cent higher.

Markets in the UK and US have not ruled out a Fed move to reignite flagging growth in the world's biggest economy when it reveals its interest rates decision this evening.

There is a growing expectation the Fed's rate-setting committee might relaunch moves to buy securities and mortgage bonds in an effort to further stimulate the struggling economy.

Gold hit record highs for a fourth day yesterday, lifted by a potent mix of factors including dollar weakness, further central bank buying and speculation more stimulus measures could prove inflationary.

Confidence in the US recovery is fragile, with data on Friday showing Americans were at their most pessimistic in over a year this month as growing fears about job security and finances undermined US consumer sentiment.

This has added to conjecture that the Fed may be considering further measures to stimulate economic growth.

"The pressure on the US central bank is gradually building and such a move would be supportive for gold as monetary base expands further and the dollar weakens," said Andrey Kruychenkov, an analyst with VTB Capital, in a note.

In currency news, the pound weakened after gloomy economic indicators, with Bank of England data showing the worst August for mortgage lending in a decade. Sterling fell 0.5 per cent to 1.56 US dollars and 0.7 per cent to 1.19 euros. One of the biggest moves in the FTSE 100 Index came from oil giant BP after the US coastguard and the company itself declared that the Gulf of Mexico well had been permanently sealed.

Shares rose 81/4p to 4113/8p, but the crisis is far from over for the oil giant as it faces the financial impact of clean-up costs, fines and civil lawsuits.

Lloyds Banking Group was also in the spotlight after announcing that chief executive Eric Daniels plans to retire in a year's time. Shares lifted 21/8p to 773/8p as the news removed uncertainty surrounding the top post.

Defence giant BAE Systems was another riser as it announced a multi-million pound deal to buy part of an American intelligence business. The group's shares rose 45/8p to 3333/4p, or 1 per cent.

Supermarkets featured on the risers' board after analysts at Bernstein lifted price targets across the food retail sector, citing rising food price inflation as a support.

Morrisons rose 71/2p to 3061/4p, Tesco was 87/8p dearer at 4371/2p and Sainsbury's added 83/4p to stand at 3941/8p.

One of the biggest rises in the FTSE 250 Index came from Brit Insurance after the sponsor of the England cricket team said on Friday evening that it had recommended a takeover proposal from private equity firms Apollo and CVC. Brit moved 401/2p ahead to 1028p.

Fellow second tier stock JD Sports Fashion joined Brit in making some advances, up 13 per cent, or 97p to 823p, ahead of its interim results today, which are expected to confirm a resilient first half from the sportswear retail group.

The biggest Footsie risers were Carnival up 118p to 2489p, Rexam ahead 111/4p to 3133/4p, Intertek up 65p to 1853p, and Hammerson, which finished ahead 121/2p to stand at 3951/4p.

The biggest Footsie fallers were Resolution sliding 4p to 2431/4p, Aggreko declining 23p to 1590p, TUI Travel down 11/4p to 2201/2p and Cairn Energy, down 15/8p to stand at 4263/4p.