FTSE 100 rises to highest level since December
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Your support makes all the difference.The London stock market hit its highest level this year as a wave of optimism about a global economic recovery swept through world markets yesterday.
The FTSE 100 index of leading UK shares ended up 2 per cent, or 79.5 points, at 4071.9, its highest closing level since 3 December last year.
The dollar also rose sharply after the International Monetary Fund hinted at a co-ordinated intervention to support the US currency after its recent tumble.
Meanwhile, the prices of gold, oil and bonds all fell as investors ditched their bets on continued weak growth and low - or even negative - inflation.
The gains in London were led by banks and other growth stocks such as media companies and telecoms, which benefit in an economic upturn. The losers were defensive stocks, which fell as traders rushed to move into higher-risk bets.
But strategists said it was a "technical" rally, and cast doubts on hopes of a concerted boom. "We haven't seen the end of the bear," said Justin Urquhart-Stewart at Seven Investment Management, who said investors should sell if the FTSE hit 4,300.
The picture was mirrored across Europe, where the German, French, Dutch and Swiss bourses all enjoyed 2 per cent-plus rises.
The markets were boosted by hopes that the European Central Bank will cut interest rates next week in the wake of the euro's sharp appreciation.
Otmar Issing, a senior ECB official, said he expected a "clear decline" in inflation as the euro dampened prices, adding that the bank would "consider this improved outlook".
The euro fell to $1.1726, down more than two cents from the all-time high of $1.1935 it hit on Tuesday.
Horst Koehler, the managing director of the IMF, told a German newspaper: "There is a point at which the accelerating depreciation of the dollar demands that governments and central banks act together."
Arguments for a rate cut on 5 June were boosted by figures showing that prices of goods leaving eurozone factories fell in April.
The money supply growth hit a 13-year high of 8.7 per cent in April, but the ECB recently downgraded the importance of this measure.
On Wall Street the Dow Jones built on Tuesday night's 180-point gain to add another 50 points, or 0.55 per cent by lunchtime in New York.
Investors ignored an unexpectedly large fall of 2.4 per cent in orders for durable goods in April to snap up technology stocks.
The surge in stocks put the brakes on the recent surge in bond prices that had pushed yields to record lows in the US, UK and Germany.
The price of gold, traditionally a safe haven in times of economic turmoil and weak growth, fell as much as $9 an ounce to $358. The oil price slipped below five-week highs that were achieved on Tuesday, falling 44 cents to $25.90 a barrel in London.
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