LONDON (Reuters) - The FTSE 100 surged on Tuesday to close above 6,400 for the first time in over five years helped by solid company reports and supportive central bank comments.
Financials and miners added the most points to the FTSE 100, with results from heavyweight stocks in both sectors meeting or beating expectations despite tricky trading environments.
Miner Xstrata gained 7.2 percent after beating expectations in its final results before it merges with Glencore, which also gained 6.2 percent after posting results.
The banking sector, which also rises and falls with optimism over the economy, made gains led up by Standard Chartered.
The globally-focussed bank reported its tenth straight year of rising profit, and gained 3 percent following its results - a rare phenomenon this earnings season among UK banks.
The results also reflect well on global growth trends, which many FTSE 100 stocks, such as the miners, are also highly sensitive to.
“To an extent, (their results) are not just about Standard Chartered, it’s a proxy for emerging market growth opportunities, which also look encouraging,” Mike Ingram, market analyst at BGC Partners, said.
“Corporate earnings have actually done pretty well, even if the economy hasn‘t, so the bull case for equity markets is actually quite reasonable,” Ingram added, saying that supportive monetary policy was also helping the gains.
The European Central Bank, the Bank of England and the Bank of Japan are all expected to stick to ultra easy monetary policy at meetings this week, following on from reassurances by U.S. Federal Reserve officials that their aggressive stimulus programme will be maintained for the immediate future.
The FTSE 100 closed up 86.32 points, or 1.4 percent, at 6,431.95, its highest close since January 2008. The gains were its biggest rise since the first day of the year, after a deal was struck to avoid automatic tax hikes in the United States which could have crimped global growth.
Indexes across Europe also hit multi-year highs, and the Dow Jones set a new record intraday peak.
Outsourcer Serco, which had been set for relegation from the FTSE 100, jumped 8.9 percent after it relaxed its payout policy and ramped up its total dividend by 20 percent year-on-year as part of a forecast-beating full-year report.
“There’s a good free cash flow ... which is often where the bears want to criticise them and they have increased the dividend,” Jamie Constable, sales trader at N+1 Singer, said in a note.
“The shares have been weak and bounced strongly today, and will it be enough to keep them in the FTSE 100.”
The day’s top movers had all faced potential demotion from the FTSE 100, with dramatic price movements potentially keeping previously under-threat stocks in the blue-chip index.
The quarterly index review will be announced after the market close on Wednesday but changes will be based on Tuesday’s closing prices.
Serco overtook Intu Properties in rankings of size by market capitalisation. Intu was one of only a few fallers on the FTSE, sliding 1.5 percent - the biggest drop on the index - and now looks set for demotion.
John Wood Group advanced 7.9 percent, as the relegation-threatened energy services firm also posted stellar results, including a 35 percent jump in profits.
However, having fallen behind Serco in size in recent days, Wood Group looked set for relegation to make way for mid-cap London Stock Exchange.
Editing by Ruth Pitchford