London surges into black as investors hunt for bargains

Metal prices rose as the impact of a deluge of poor economic news faded and traders decided that hard-hit commodities looked over-sold.

The Footsie finished 2.9 per cent, or 141.47 points up at 4965.00 – the highest close in more than a week which brought the 5000 barrier back into view.

Across the Atlantic, the Dow Jones Industrial Average was 1.4 per cent ahead after being closed on Monday for the long holiday weekend as investors looked past signs of slowing growth among US services firms.

The US service sector expanded in June for a sixth straight month but the rate of growth slowed to the lowest pace since February, the latest evidence that the economic recovery is cooling.

Analysts said the data released yesterday by the Institute for Supply Management, an industry group, did not signal that the United States is slipping back into recession.

But the data on business activity in the service sector, which dominates the US economy, did follow a raft of weak reports in recent weeks on consumer spending, factory activity, employment and the housing market that have raised fears about the path of the recovery.

Gains were also seen on indices across Europe, with the Cac 40 in France and Germany's Dax both registering gains of more than 2 per cent.

The pound edged below 1.52 against the dollar and stood at 1.20 against the single currency.

With just a handful of top-flight stocks in negative territory the Footsie risers' board was led by miner Antofagasta, which cheered 571/2p to 8181/2p, helped by the better sentiment.

BP, meanwhile, enjoyed its second positive session in a row with a gain of 121/4p to 3451/2p – a rise of almost 4 per cent. This followed Royal Bank of Scotland's decision to upgrade the stock from hold to buy and after the oil company insisted it would be able to meet the cost of the Gulf of Mexico oil spill without issuing new shares.

The positive session extended to banking stocks, with Barclays up 153/8p to stand at 2745/8p and RBS up 2p to 407/8p.

Housebuilders were in positive territory after Persimmon reported a 25 per cent rise in half-year turnover and said sales had returned to more normal levels since the Budget.

Charles Church owner Persimmon jumped 213/4p to 3701/4p, while Barratt Developments was 5p higher at 987/8p.

Online gambling group PartyGaming was also enjoying sharp rises after it said casino revenues grew despite the football World Cup.

Sales grew 6 per cent in the first quarter of 2010 – helping shares

rise 5 per cent, or 103/4p to close at 2311/2p – despite tougher conditions for its poker arm.

But fellow FTSE 250 stock N Brown, the home shopping firm, fell 113/4p to 2431/8p after it said that like-for-like sales growth had slowed to 0.1 per cent as consumer caution hit spending.

Elsewhere, educational software supplier RM was 1 per cent off after revealing that the Government's decision to axe its school rebuilding scheme would put 200m of projects at risk.

The shares recovered from an initial double digit drop as analysts said the impact was unlikely to affect RM's long-term future. RM shares finished 2p worse off at 160p.

The biggest Footsie risers were Antofagasta, Kazakhmys ahead 691/2p to 1037p, Xstrata up 543/4p to 9053/4p and Icap which ended the day 233/4p higher at 4163/4p.

Biggest fallers were African Barrick Gold down 161/2p to 584p, Pearson off 11/2p to 886p, WPP off 1p to 6301/2p and Severn Trent 1p lower at 1229p.