The FTSE gained as much as 2.2% to reach 5262.50 this morning following an overnight rally on Wall Street last night.
The Dow Jones Industrial Average ended last night's trading session 2.25% higher at 10249.54 and the S&P 500 closed 2.6% above its previous close at 1098.38 on the back of robust auto figures and pending home sales. Expectations of a strong US non-farm payroll figure tomorrow are also driving the market higher.
A survey of estimates compiled by Bloomberg indicates the market is expecting tomorrow's US payrolls figures to surge by 515,000 in May, the fifth straight month of gains and the biggest since 1983. A glimpse of what could be in store tomorrow is likely to be reflected in this afternoon's US ADP report, which is forecast to show that 70,000 jobs were created in May, the best performance since the recession began in December 2007.
'We have a positive attitude about the economy,' said Pierre-Alexis Dumont, a fund manager at OFI Asset Management. 'If the economy rebounds elsewhere, it will have an impact on Europe. Investors have been too alarmed regarding the eurozone. This is a buying opportunity.'
By 10.45am (London time) the FTSE 100 Index was trading at 5244.32, representing a 93-point move (+1.81%) above its previous close, while the broader FTSE 250 was 154.30 points higher (+1.60%) at 9814.68.
Miners and energy majors added the most points to the blue-chip index this morning, with BP, up 3.3% to 443.9p, outperforming peers on speculation that this week’s decline was overdone. The company said it will try to cut the main pipe on a leaking oil well in the Gulf of Mexico again after freeing a saw blade that became stuck during preparatory work to siphon the crude to ships on the surface. Sector peer Shell gained 1.8% to 1846.5p, Tullow Oil advanced 2.4% to 1155p and BG Group added 2.5% to 1089.5p.
Miners put on strong gains as well today following a rebound in underlying metal prices. Eurasian Natural Resources was the sector’s best performer this morning, soaring 5.5% to 1043p followed by Kazakhmys and Rio Tinto, which gained 4.1% to 1207p and 3.3% to 3240.50p respectively. Xstrata, which today threatened to scrap its Australian projects over the proposed supertax, climbed 2.9% to 1020.50p.
Banks also contributed to the FTSE's rally, although market sentiment appears to be rather lukewarm. Sector gains ranged between 1.5% and 2.8% this morning, after the Financial Services Authority said it fined JPMorgan Chase a record £33.32 million for failing to separate client money held by its futures and options business from the firm's own money between November 2001 and July 2009.
Meanwhile, insurer Prudential underperformed sector peers this morning, rising only 0.9% to 566p, after saying it will have to pay AIG a termination fee of £152.6 million for walking away from a $35.5 billion takeover deal. Peer Aviva jumped 2.7% to 334.7p and Legal & General gained 1.9% to 81.15p.
Broker upgrades have contributed to the positive equity market sentiment as well today. Shares of advertising agency WPP rallied 3.9% to 672p after UBS upgraded its rating on the stock to 'buy' on valuation grounds. 'With WPP now the cheapest of its peers ... [the stock's] weakness partly reflected its recent relative underperformance in organic growth delivery, but this growth differential could start to close in the second quarter,' UBS analysts wrote in a note. Meanwhile Tate & Lyle, the maker of low-calorie sweetener Splenda, rose 2% to 459.3p this morning after Royal Bank of Scotland upgraded the shares to 'buy', saying it sees 'the current valuation as an attractive entry point'.
In economic news, Nationwide today said its UK house price index climbed 0.5% in May, beating expectations. This follows a revised 1.1% gain the prior month. UK Purchasing Managers' Index for the services sector rose less than anticipated, however, coming in at 55.4 in May from 55.3 the prior month.
Germany's PMI services fell to 54.8, however, down marginally from the prior month’s 55.2 reading but ahead of consensus estimates. The EU PMI services reading rose to 56.2 from 56 in April, but eurozone retail sales unexpectedly plunged 1.2% in April.
Looking ahead, the US ADP Employment report is scheduled for release at 1.15pm (London time) followed by the jobless claims data and non-farm productivity report at 1.30pm. US factory orders and ISM non-manufacturing data will follow at 3pm and the US Energy Department’s crude oil inventory report will be released at 4pm.
US stock futures were pointing to another day of gains on Wall Street, meanwhile, with Dow and S&P 500 futures up by around 0.40% this morning.
