US recovery hopes help lift Footsie to 21-month high

Investor sentiment was buoyed after the US Federal Reserve noted that there were some encouraging improvements in the American economy and stressed it was in no hurry to tighten monetary policy.

Wall Street added another 42 points in early trading after a strong finish on Tuesday on the news, while the FTSE 100 in London closed the day 24.20 points higher at 5644.63.

US stocks climbed after a benign February inflation reading buttressed the Fed's renewed vow of low interest rates.

Data from the Labor Department prior to the market opening showed a steeper-than-expected drop in the February Producer Price Index, indicating inflation pressure was minimal and further supporting the near-zero interest rates that have helped propel the rally in equities.

"It doesn't appear as if there is any inflation fears out there – the market is not spooked at all," said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.

Stocks were also put on the front foot after the Bank of Japan said it would offer more cheap loans to banks in order to fight off deflation.

Tokyo's Nikkei index rose by more than 1 per cent overnight, with stock markets globally joining in the rally.

The Footsie's improvement came despite mixed news for the UK economy after a surprisingly big fall in unemployment was offset by the number of economically inactive people reaching a record 8.16 million. The number of people actually out of work for longer than a year jumped by 61,000 to 687,000, the worst figure since 1997.

Stronger commodity prices meant miners dominated the risers' board, with Fresnillo up 28p to 854p and Kazakhmys ahead by 36p to 1532p.

B&Q owner Kingfisher was another strong gainer, up 2 per cent, or 53/8p to 2283/8p, after HSBC upgraded its rating on the retailer and lifted its target price to 310p ahead of the group's results next week.

Next, also reporting next week, was on the advance after Zara owner Inditex reported a 5 per cent rise in annual profits and said sales had been strong in the period since the start of February.

Shares in Next lifted 35p to 2069p as investors also looked towards the company's annual results next week.

Security group G4S continued to suffer a hangover following its annual results on Tuesday, as shares declined another 13.3p to stand at 2557/8p.

The stock has given back recent gains after it said organic revenues would be flat this year.

Collins Stewart downgraded its rating on the stock to hold and noted reports that Royal Bank of Scotland is looking to place 141 million shares that belong to the estate of the group's former chairman, who died in January.

The biggest move in the FTSE 250 Index came from rail and bus stock Arriva after it confirmed that it had received an unsolicited takeover approach. The CrossCountry rail operator did not identify the party, but speculation has centred on Germany's Deutsche Bahn. Arriva shares surged 17 per cent, or 971/2p to 677p.

Meanwhile, shares in pubs chain JD Wetherspoon remained under pressure after a broker downgrade on Tuesday. The stock slipped 203/4p to 4981/4p.

The biggest Footsie risers were Autonomy ahead 79p to 1815p, Fresnillo, Resolution ahead 23/8p to 74p and Kingfisher.

Biggest fallers were G4S, Standard Life off 83/8p to 2081/4p, Man Group down 9p to 2371/4p and Thomas Cook off 71/8p to 2447/8p.