London posts 3pc gain as BP rise aids FTSE revival

BP raced 283/4p ahead to 5203/4p amid signs its attempts to control the Gulf of Mexico oil well spill may be working.

Its gains helped the Footsie rally step up a gear, closing 157.09

points ahead at 5195.17.

A report that the US economy grew at a 3 per cent annual rate from January to March, slightly weaker than an initial estimate of growth of 3.2 per cent a month ago, failed to halt the shares bounce back.

But the figure surprised analysts who had expected growth to be revised up to 3.4 per cent after monthly data pointed to stronger consumption and capital spending.

Although economic activity slowed from the fourth quarter's robust 5.6 per cent pace, analysts still believe the recovery is strong enough to absorb a moderate blow from a European sovereign debt crisis sparked by Greece's deteriorating finances.

"It's certainly a downside risk, but we don't think it's a large risk as long as there is no financial contagion," said Dana Saporta, an economist at Stone & McCarthy Research Associates in Princeton, New Jersey.

Investors on both sides of the Atlantic were focused on cheap-looking stocks after the falls of recent sessions.

The Dow Jones Industrial Average on Wall Street rose 1.8 per cent within hours of opening.

Confidence was also boosted by a much-needed gain for the euro after the single currency set a new four-year low against the dollar on Wednesday.

The single currency was up 1 per cent to just over 1.23 dollars and also strengthened against sterling, with the pound down to below 1.18 euros.

Among London stocks, mining and financial shares were again on the front foot as investors eyed bargains following the market's recent slump to an eight-month low.

Hedge fund giant Man Group set the pace with a gain of 23p to 2381/4p, but eyes were on insurer Prudential as it moved 7 per cent higher, up 35p to 5471/2p, with speculation swirling around its 24bn deal to buy AIA.

Vague trader rumours suggested Pru may pull the planned takeover before putting it to shareholder vote.

Fellow life and pensions group Aviva was also making strong advances, up 213/8p to 3211/4p.

Vedanta Resources led the miners higher with a gain of 138p to 2311p.

Outside the top flight, defence research group QinetiQ jumped 12 per cent after new chief executive Leo Quinn announced details of a major restructuring.

The company posted a bottom-line loss and will suspend dividend payments for a year, but shareholders approved of Mr Quinn's strategy as shares rose 13.7p to 130p.

There was no such rally for JJB Sports, which is also under pressure after reporting losses of 68.5m for the 12 months to January 31. Sales have picked up since then, but JJB shares still tumbled 23/4p to 171/2p.

News of a return to profits at the Daily Mail and General Trust helped the FTSE 250 stock rise 2 per cent, up 97/8p to 4817/8p.

It reported a 42 per cent leap in underlying pre-tax profits and revealed a revival in advertising revenues that has continued into the second half.

Also in the second tier, Tate & Lyle dropped 2 per cent with a 91/4p fall to 4151/4p as reported plans to sell off its sugar business failed to materialise. This overshadowed full year profits that were in line with expectations, down 7 per cent to 229m.

The biggest Footsie risers were Man Group, Legal & General ahead 51/2p to 791/8p, Segro up 193/8p to 2831/2p and Aviva.

The only Footsie faller was United Utilities which fell 1p to close at 5241/2p.