Britain's FTSE 100 ended 2 percent higher on Friday, setting its highest close since early October 2008 and completing a fruitful week for the index as stocks extended their rally on the back of strong economic data. Led by commodity and financial stocks, the FTSE 100 index closed 94.31 points higher at 4,850.89, its fourth straight day of gains and trading above 4,800 for the first time since October 12, 2008.
The UK benchmark advanced 2.9 percent on the week and is up 9.4 percent this year, after rallying 40 percent since hitting a floor in early March. Britain traced gains across Europe and in the United States after better-than-expected July existing home sales figures from the United States and bullish comments from Federal Reserve Chairman Ben Bernanke, who said prospects for a return to growth in the near term appeared good.
Oil producers were firmer as crude prices rose towards $74 a barrel, extending a recent strong run after data this week showed a surprise drawdown in US inventories. BP, Royal Dutch Shell, BG Group and Cairn Energy added between 2 and 4 percent.
Miners Fresnillo, Lonmin, Vedanta Resources, Xstrata, Rio Tinto and Anglo American put on 2.1 to 3.6 percent. "The Fed chairman is obviously an important cog in the wheels of the economic world and the positive comments from him have been received really well," said Keith Bowman, analyst at Hargreaves Lansdown.
Bowman said the rally looked set to continue but counselled there are still lingering concerns both in the United States and in China, where there is a potential threat of the Chinese tightening the flow of credit. Sales of previously owned US homes in July notched their fastest pace in nearly two years, an industry survey showed, the strongest sign yet that housing was pulling out of a three-year slump. Legal & General climbed 5.6 percent. Goldman Sachs reiterated its "conviction buy" on the life insurer in a sector review.
Peers Aviva, Old Mutual and Standard Life were up 2.5 to 5.5 percent. Banks also rose, with Royal Bank of Scotland, Lloyds Banking Group and Standard Chartered up 0.9 to 2.8 percent.
British Airways soared 7.2 percent with traders citing a short squeeze on the beleaguered British airline. Drugmakers, which have lagged behind the broader market rally with only a 25 percent gain since March, were also in demand. GlaxoSmithKline, AstraZeneca and Shire rose between 1.5 to 2.3 percent.
Software firm Sage, however, lost 2 percent after US peer Intuit forecast 2010 earnings would be below analysts' estimates and saw tight economic conditions prevailing for at least another year.
"What you are seeing here is confirmation that any time since March, any selling has purely been people taking profit. They will come back to take up the slack and pick up more stocks. There is no return to March 9 lows," said Stephen Pope, chief global market strategist at Cantor Fitzgerald.
Yet not all were buying into the rosy scenario. Nick Bullman, managing partner at hedge fund firm Bullman Investment Management, said he had placed bets on falling share prices and believed equities may be 20 percent overpriced. "The rally has been a 'dash for trash' based on speculation ... stocks that were on their knees have risen to pre-Lehman levels, but the fundamentals haven't changed at all," Bullman said.