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FTSE gains as stimulus hopes boost confidence

Published 10/06/2010, 04:22 AM
Updated 10/06/2010, 04:24 AM
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* FTSE 100 up 0.7 percent, at highest since late April

* Miners, energy lifted by hopes of stimulus

* Airlines gain on strong easyJet numbers

By Simon Falush

LONDON, Oct 6 (Reuters) - Hopes that governments around the world will make fresh moves to stimulate their economies helped lift commodity share prices, pushing Britain's top share index to its highest level in over five months early on Wednesday.

By 0801 GMT, the FTSE 100 was 38.42 points or 0.7 percent higher at 5,674.18 after it gained 1.4 percent on Tuesday, its highest close since late April.

Miners gave the biggest boost to the index as gold hit a record high and copper rose to its highest since July 2008 as the demand outlook brightened on expectations that governments would do more to stimulate the economy.

Xstrata, Anglo American and Kazakhmys added 2.7-3.5 percent.

Energy firms were also stronger with crude hitting its highest in five months. Royal Dutch Shell gained 0.6 percent.

The Bank of Japan unexpectedly cut interest rates on Tuesday, supporting a view that other governments will act further to bolster an uncertain economic recovery.

Wall Street also added to gains on Tuesday after the Institute for Supply Management's index showed the pace of growth in the U.S. services sector accelerated more quickly than forecast in September, while hiring also picked up.

"Central banks are moving towards additional stimulus in the United States and Japan, but as important, growth data has been good relative to expectations and there's been an improving trend," said Ronan Carr, European equity strategist at Morgan Stanley.

COST JUMP

A survey by the British Retail Consortium showed that a jump in the cost of agricultural commodities drove British shop price inflation to a five-month high in September, but weak consumer demand should contain price pressures in the rest of 2010.

Across the Atlantic, the September U.S. ADP Employment survey, due at 1215 GMT, will come under close scrutiny ahead of Friday's key U.S. non-farm payrolls data.

Sainsbury was among the top fallers, down 0.8 percent. Its chief executive said it may "squeak in" to the bottom end of its mid-term 3-4 percent underlying sales growth range this year.

Among mid-caps easyJet jumped 8 percent after the budget airline said it expected to beat its profit expectations for the year following a strong performance over the summer.

This helped blue-chip peer British Airways gain 3.3 percent, adding to sharp gains the previous day, after it too reported strong passenger numbers.

Ex-dividend factors knocked 1.16 points off the FTSE 100 index, with Admiral Group, Alliance Trust, British Land, Capital Shopping Centres, Kingfisher, Weir Group and WPP Group all trading without their payout attractions. (Editing by Greg Mahlich)

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