Mining heavyweights gain after strong Chinese data

The FTSE 100 Index closed 63.89 points up at 5565.53, while in the US the mood was much the same, with the Dow Jones Industrial Average ahead by nearly 1 per cent.

The S&P 500's advance in the US has investors watching the 1,130 level, with analysts saying if the index breaks above that point, which has generally been the top of a recent trading range, more gains could lie ahead.

"All summer we've been going sideways, so once you get to borders of that range, the market has a decision to make. My sense is that the technical landscape has really become much more positive," said John Kosar, director of research at Asbury Research in Chicago.

Indexes were on track for a fourth session of increases, including an eighth day of gains out of the last nine for the S&P 500 and Dow. With yesterday's rise, all three indexes were in positive territory for the year.

Stock markets had earlier been put on the front foot after new rules on bank reserves and strong economic data in China lifted banks and mining stocks.

The data saw the pound up against the US dollar at 1.54, but it was down against the euro at 1.19, which is more likely to benefit from strong Chinese growth.

Industrial production in China bounced back from a slowdown in July to grow by 13.9 per cent in August when much of the market had expected a slowdown.

The potential of greater Chinese demand boosted the mining industry, with copper firm Kazakhmys soaring to the top of the Footsie, after its shares lifted 5 per cent, or 67p to 1352p.

Metals company Vedanta Resources was not far behind with shares up 3 per cent, or 71p to 2109p, while Xstrata was ahead 341/2p to 1170p.

Royal Bank of Scotland and Lloyds Banking Group were both higher, up 11/8p to 495/8p and 2p to 775/8p respectively, as analysts said that UK banks were well positioned in the wake of Basel rules for minimum capital ratio requirements.

Traders piled into Prudential, which jumped ahead by 4 per cent at one stage, on speculation of potential takeover interest in the UK insurer from a group of Chinese investors.

The billionaire entrepreneurs had wanted to throw their weight behind the Pru's failed takeover bid for the AIG division AIA, but are now in the early stages of considering a deal to take control of Prudential's Asian business, according to the Sunday Times. Pru shares lifted 181/2p to 618p.

BAE Systems was also looking strong after the defence giant hired advisers to help it consider the sale of its US-based platform solutions division.

With a deal set to raise as much as 1.3bn for the UK firm, shares were 101/4p higher at 3331/8p.

Primark parent Associated British Foods sank to the bottom of the FTSE 100, after it warned that increases in its costs and looming VAT changes would put retail margins under pressure next year.

AB Foods is also fighting against soaring wheat prices at its food arm, which includes Kingsmill and Allinson bread company Allied Bakeries.

Despite forecasting full-year sales and profits at the budget clothing group to be "well ahead", shares fell more than 1 per cent, or 16p to 1072p.

Outside the top flight, stocks in mobile phone chip manufacturer CSR soared after it announced a share buyback programme of up to 50 million US dollars (32m), sending it to the top of the FTSE 250 risers' board.

Shares at the Cambridge-based firm were up 11 per cent, or 351/4p to 351p.

The biggest Footsie risers were Kazakhmys, Wolseley, ahead 69p to 1450p, Vedanta Resources, and Anglo American, ahead 81p to 2587p.