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LONDON (Reuters) - The FTSE 100 rebounded on Friday from sharp falls in the previous session, with good earnings and an optimistic global economic outlook pushing the market back towards four-and-a-half year highs.
The FTSE 100 rebounded after two days of falls which nevertheless failed to significantly dent the index's best January since the 1980s.
The index added to early gains in afternoon trade, buoyed by non-farm payrolls jobs data out of the United States.
Even though the index dipped immediately after the data, which showed jobs added last month coming in slightly below expectations, strong revisions to the previous months' figure helped the index to add an extra 0.6 percent before the close.
"Payroll data was very close to consensus, but the encouraging point was the previous month's revisions which were around the 200,00 mark," said James Butterfill, global equity strategist at Coutts.
"The three month average change is now 200,000, which is indicative of a more established economic recovery."
The FTSE 100 index closed up 70.36 points, or 1.1 percent at 6,347.24 points - its biggest gain since the first trading day of the year and enough to push it back to near its best level since May 2008.
Every sector ended in positive territory, with the heavyweight basic materials market adding over 16 points to the index, boosted by renewed optimism over the global economy.
The sector benefited in morning trade from data showing euro zone manufacturers enjoyed their strongest month in nearly a year in January.
The top gainer however was BT. The telecom provider surged 7 percent in volume of 1.8 times its 90-day average after reporting better-than-expected profits on strong demand for broadband services.
"BT has achieved much in turning around what had been a flailing former monopoly," Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, said.
The FTSE 100 closed higher in the first trading session of the month for the 12th time in 13 months.
Despite falling in the last couple of sessions of January, the FTSE has enjoyed its best start to the year since 1989. Its gain of 6.4 percent in January outstripped the index's rise for the whole of last year.
"From a chartist point of view, the FTSE 100 remains in rally mode and failed to validate any reversal signal," said Trading Central technical analyst Nicolas Suiffet.
"On a short term perspective, due to the rapidity of the rise, a correction could take shape but it would be a buying opportunity for investors who felt left out."
Additional reporting by David Brett; Editing by Catherine Evans