LONDON (Alliance News) - The UK's main stock indices all closed firmly higher Tuesday, with airline and travel stocks leading the way as oil prices slid, on growing hopes that Syria will avoid military strikes by the US and its allies.
The FTSE 100 closed up 0.8% at 6,583.99, the FTSE 250 ended the day up 1.2%% at 15,270.73, and the AIM All-Share closed up 0.7%% at 773.5, having reached 783.5 points, a new high for the year. The AIM index has now hit a new high for the year for sixteen consecutive days. The FTSE SmallCap index also made big gains, closing up 1.7% at 4,223.9, having achieved a high for 2013 as it closes in on its highest point for the last 16 years.
The possibility that Syria may hand over its stocks of chemical weapons to international control put pressure on gold and oil prices, with gold down to USD1364.92 an ounce and brent oil down sharply to USD111.41 a barrel by the time the UK equity markets closed.
President Barack Obama will make a television address to US citizens later as officials in Washington cautiously, but skeptically, welcomed Syria's pledge to handover and then destroy its stocks of chemical weapons in a plan sponsored by Russia.
In an effort to ensure Syria sticks to the deal, France said it was working on a UN resolution that will demand Syria dismantle its chemical weapons programme or face "extremely serious consequences".
Obama is still expected to make a strong case for Congress to authorise action, believing that the threat of military action is required to ensure the Syrian regime follows through. Congress will vote on the issue Wednesday.
EasyJet closed up 7.2% at 1,358 pence, and International Consolodated Airlines rose 4.1% to 318.0482p, by far the biggest gainers on the blue-chip index. Conversely, oil and gas stocks suffered with BG Group one of the biggest losers on the FTSE 100, down 1% at 1,205.0948p.
The improved sentiment started in Asia overnight and continued round the world, with the main indices in the US also posting solid gains at the UK close. The DJIA was up 0.7% at 15,170.17, while the S&P was up 0.6% at 1,682.03 and the NASDAQ up 0.6% at 3,728.15.
Markets were initially buoyed by more positive data from China, where industrial production rose 10.4% on the year in August, well above expectations for a 9.9% rise. August retail sales rose 13.4%, just above consensus of 13.3%.
In the UK, the latest house price balance index from the Royal Institute of Chartered Surveyors showed an increase to 40 in August, from a revised reading of 37 in July, while the index of new buyer enquiries rose to 66, from 54 previously, suggesting more house price inflation looks likely in the coming months.
Although critics will say there are growing signs of a house price bubble, house builders are benefiting from government programmes to help first-time buyers onto the market and their shares are rising. The FTSE 350 housebuilders sector index rose 1.5% Tuesday.
One of the house builders, Barratt Developments, reports full-year results Wednesday, and is joined by companies including home improvements company Kingfisher Group and confectioner Thorntons.
On the economic calendar, French nonfarm payrolls are scheduled for 0530 BST, with a raft of German consumer price data expected at 0600 BST. The UK claimant count data, unemployment rate and average earnings reports is due at 0830 BST. In the US, there is the EIA crude oil stocks change at 1430 BST, before the US Congress votes on military action against Syria at 1800 BST.
By James Kemp; jameskemp@alliancenews.com
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