Britain's leading share index hit a near four-month closing high on Friday after a better-than-expected US jobs report eased concerns of the world's largest economy slipping back to another recession.
However, a weaker August reading of the US services activity index limited the gains on the FTSE 100, which closed 57.11 points or 1.1 per cent higher at 5428.15, up for the sixth straight session.
Economy-sensitive banks were among the top gainers, up 1.3 per cent, with Barclays rising 4.2 per cent and Standard Charatered up 2.2 per cent. Oil and gas producers, lifted by the improving economic optimism, added 1.4 per cent. BP rose 2.3 per cent and Royal Dutch Shell gained 1.4 per cent.
"We generally remain optimistic that the economy will bump along the bottom for a bit. But the upshoot of that will be once investors start to realise that things aren't as bad as we thought," Peter Dixon, UK economist at Commerzbank, said.
"The upside in equities still remains in place. After all, valuations are decent."
The blue chip index recorded a gain of 4.4 per cent this week, its biggest weekly percentage rise in eight weeks, and ended just shy of 5434.23, its 61.8 per cent Fibonacci retracement level of the peak in April to the low on July 1, for the first time since late April.
Volumes were 65 per cent of its 90-day daily average ahead of the Labor Day long weekend in the United States.
US employment fell for a third straight month in August, though the drop was far less than expected and private payrolls growth surprised on the upside.
"Today's (non-farm payrolls) result lowers the odds of recession a bit further and makes Fed action at the September meeting less likely," Nomura said in a note.
Fears about the state of the global recovery have eased somewhat this week on surprisingly strong manufacturing data from the United States and China, while economic figures from Australia also improved confidence.
VOLATILITY HITS 2-WEEK LOW
The FTSE 100 volatility index fell 5.9 per cent, hitting a two-week low and indicating a firmer appetite for risk.
Shares in Aggreko, the world's largest provider of temporary power, climbed 5.5 per cent, topping the FTSE 100, with traders citing talk on the FT Alphaville website that it may be the subject of bid interest from Swiss engineering group ABB. Aggreko declined to comment.
Autonomy advanced 3.4 per cent, making it among the top FTSE 100's gainers and extending Thursday's 5.2 per cent rise on expectations that the UK software maker could be a bid target.
The FTSE 100 is looking cheaper than other major indexes. It carried a one-year forward price-to-earnings of 9.55 times and a 12-month forward price-to-books of 1.5 times, compared with U.S. S&P 500's 11.55 and 1.7 respectively, and Germany DAX's 9.87 and 1.26, according to Thomson Reuters Datastream.
Reuters
