FTSE surges as US figures boost investor confidence

The Dow Jones Industrial Average gained more than 1 per cent early on after strong numbers from the likes of Asda owner Wal-Mart and Home Depot, as well as a bigger than expected leap in industrial production.

This left London's blue-chips up 74.45 points at 5350.55 as UK inflation – which fell to 3.1 per cent in July – also failed to spring any unpleasant surprises.

The pound saw a weaker day, falling below 1.21 euros and 1.56 against the dollar.

Commentators cited relief at successful bond auctions by the Irish and Spanish governments boosting the single currency, while the greenback was helped by the stronger industrial data.

Industrial output in the US jumped 1 per cent last month after slipping 0.1 per cent in June, the Federal Reserve said.

Output gains were seen across the board, with automotive products surging 8.8 per cent.

Another report showed US prices paid at the farm and factory gate rose 0.2 per cent last month, pulled by higher prices for food and consumer goods, the Labor Department said.

The increase, which was in line with market expectations, was the first advance in producer prices in four months.

Core producer prices, which strip out energy and food costs, increased 0.3 per cent from June.

In London insurers again caught the eye with gains of more than 5 per cent for both Aviva and Prudential. Aviva added 193/8p to 3971/4p after Citigroup raised its price target on the stock and investors refused to rule out further developments in RSA's pursuit of the company's general insurance business.