Service sector boost confounds forecasts

The headline business activity index in the Markit/CIPS PMI index rose to 53.2 last month from 52.8 in September, the highest reading since June and confounding forecasts for a dip to 52.5. The figures were the latest in a run of unexpectedly firm economic data that analysts said indicated the recovery was on a relatively firm footing, and dented already waning market speculation that the Bank might expand its quantitative easing programme as early as this week.

Gilt prices fell and the pound rose to a nine -month high against the dollar as investors scaled back their bets on the chance of any monetary easing from the Bank.

"It reaffirms what we already knew: there's absolutely no need for the Bank at this stage to engage in any further quantitative easing and they're very much on hold for the foreseeable future," said Peter Dixon, economist at Commerzbank.

The services PMI data came after an unexpectedly robust survey of manufacturing activity and weaker construction and jobs PMI data this week, but on balance suggest Britain's economy made a solid start to the final quarter of this year.

There is a risk of a slowdown further down the line, as the survey showed companies cut jobs and expectations for the year ahead.