Hopes that US lawmakers can lift the debt ceiling and avert a default spurred markets higher on Friday with the FTSE 100 rising to levels not seen in two weeks.
Sentiment was also lifted by the successful stock-market debut of postal group Royal Mail which soared by over a third after attracting a great deal of buying interest. The stock jumped to 455p, up around 38% from the listing price of 330p, fuelling the argument that the shares
were underpriced by the government.
The FTSE 100 finished 53.3 points higher at 6,483.79. Since falling to a three-month low earlier in the week, London's benchmark index has surged over the last two days on hopes of an agreement between US politicians. The last time the index closed higher was on September 27th when it finished the session at 6,512.66.
Indices across Europe registered smaller gains today, though Germany's DAX 30 in Frankfurt rose 0.45% to an all-time high of 8,724.83.
Wall Street benchmarks also started the day strongly this afternoon, extending gains after an impressive performance on Thursday, despite economic bellwether JPMorgan Chase & Co reporting its first quarterly loss in nearly a decade. The bank booked a third-quarter loss of $380m, the first time it has failed to report a profit since the second quarter of 2004.
Lawmakers look to end political deadlock
House Speaker John Boehner on Thursday afternoon announced a proposal to raise the limit for six weeks without conditions tied to changes in policy. He said he hopes that President Barack Obama would view the "good-faith" move as an attempt to meet him halfway on negotiations over the budget.
Obama and House Republicans failed to come to a deal following a 90-minute meeting late last night, but showed that they were still willing to negotiate. "After a discussion about potential paths forward, no specific determination was made," the White House said in a statement. "The President looks forward to making continued progress with members on both sides of the aisle."
While any deal would not automatically re-open the government - lawmakers still need to agree on a new budget - confidence in averting a default has now undeniably increased on the markets.
FTSE 100: Whitbread jumps after broker upgrade
Restaurant and hotels owner Whitbread advanced after Citigroup upgraded the stock to 'buy', saying: "Improved sentiment around the European economies suggests that we could be at the start of a renewed upgrade cycle for European focused hotel names". Whitbread gained strongly on Thursday after one analyst cited the possibility that it could spin off its Costa coffee chain.
Standard Life was a high riser after JPMorgan Cazenove reiterated its positive stance on the stock, reassuring investors about net inflows in the third quarter. Diageo gained after Exane BNP Paribas raised the drinks giant to 'outperform'. Meanwhile, Travis Perkins received a boost today after Liberum Capital raised its target price and reiterated its 'buy' rating on the builders' merchant and home improvement retailer.
In contrast, speciality chemicals firm Croda International was a heavy faller after analysts at Liberum Capital downgraded the stock to 'hold'. JP Morgan also lowered its view on the shares today, to 'neutral' from 'overweight'.
Stocks heavily exposed to the US defence markets, such as BAE Systems and Meggitt, were trading in the red after some cautious comments from sector peer Chemring.
Anglo American was performing well after an 11-day strike over job cuts at its platinum division in South Africa came to an end. Mining peer Glencore Xstrata was also higher; however precious metal producers Fresnillo and Randgold finished in the red as gold and silver prices fell.
FTSE 250: Chemring shares plunge on warning
Military equipment manufacturer Chemring sank sharply this morning after saying that its North American business continues to be affected by the US government shutdown and said the full impact was unknown - although it would have a definite impact on October order intake and deliveries in the US Department of Defense.
It has suffered quality and production issues, particularly at Kilgore, and will also suffer from an adverse move in the sterling/dollar exchange rate, reducing operating profits by around £8m.
N Brown was regaining lost ground after falling earlier this week on the back of an unimpressive set of results. The group revealed that first-half profits before tax came in at £45m, below analysts' forecasts, due to a worse-than-expected margin performance, which offset better like-for-like sales growth.
Howden Joinery was performing well after it received a positive broker rating on the previous day from Goodbody Stockbrokers, which upgraded the stock to 'buy'.
FTSE 100 - Risers
Travis Perkins (TPK) 1,678.00p +3.26%
Whitbread (WTB) 3,210.00p +3.08%
Glencore Xstrata (GLEN) 335.90p +2.83%
Diageo (DGE) 1,973.00p +2.71%
Shire Plc (SHP) 2,445.00p +2.69%
Standard Life (SL.) 355.50p +2.63%
Aberdeen Asset Management (ADN) 393.40p +2.61%
Anglo American (AAL) 1,512.00p +2.44%
Schroders (SDR) 2,644.00p +2.32%
Amec (AMEC) 1,085.00p +2.26%
FTSE 100 - Fallers
Croda International (CRDA) 2,477.00p -4.80%
BAE Systems (BA.) 436.30p -3.19%
Royal Bank of Scotland Group (RBS) 376.90p -2.08%
Wolseley (WOS) 3,169.00p -1.00%
Meggitt (MGGT) 541.00p -0.92%
Fresnillo (FRES) 927.00p -0.91%
Aggreko (AGK) 1,477.00p -0.87%
Randgold Resources Ltd. (RRS) 4,304.00p -0.74%
Coca-Cola HBC AG (CDI) (CCH) 1,728.00p -0.40%
Pearson (PSON) 1,292.00p -0.39%
FTSE 250 - Risers
Brown (N.) Group (BWNG) 502.00p +5.53%
Howden Joinery Group (HWDN) 308.50p +4.51%
Ferrexpo (FXPO) 183.70p +3.96%
Galliford Try (GFRD) 1,098.00p +3.10%
Ladbrokes (LAD) 190.70p +3.08%
Hays (HAS) 121.60p +2.96%
Redrow (RDW) 248.00p +2.95%
International Personal Finance (IPF) 637.50p +2.91%
Investec (INVP) 420.20p +2.84%
Ophir Energy (OPHR) 316.40p +2.79%
FTSE 250 - Fallers
Chemring Group (CHG) 220.00p -22.64%
Kenmare Resources (KMR) 25.70p -11.65%
Polymetal International (POLY) 559.00p -5.25%
Keller Group (KLR) 1,010.00p -3.81%
Hochschild Mining (HOC) 152.70p -3.78%
Euromoney Institutional Investor (ERM) 1,060.00p -2.75%
Ocado Group (OCDO) 434.90p -2.69%
Alent (ALNT) 338.20p -2.68%
Diploma (DPLM) 615.00p -2.54%
RPC Group (RPC) 453.90p -2.26%