A strong opening performance from Wall Street transformed trading in London and carried the FTSE 100 index almost up close to the 6,500 level.
The US non-farm payroll numbers, released at 1.30 p.m. London time, showed only an 11,000 increase in employment in June, compared with expectations of 263,000. Hourly earnings rose 0.4 per cent, as expected.
Although the payroll figure was distorted by the laying-off of temporary census workers, the figure was positively received in US bond and equity markets on the grounds that it did nothing to encourage the Federal Reserve to raise interest rates when it next meets in August.
The Dow was nearly 150 points ahead just after London closed and the Nasdaq Composite index climbed back over the 4,000 level.
That helped UK technology stocks rebound after some losses earlier in the week inspired by a spate of profit warnings from the US hightech sector. The heavily weighted telecoms sector also came back strongly in the afternoon.
Footsie, which had traded in a narrow 50-point range during the morning, surged ahead and was 83 points up at 6,502.6 at best. The blue-chip index then slipped a few points to close 77.9 ahead at 6,497.5.
The other indices were also stronger. The FTSE 250 gained 22.8 to 6,626.6, the SmallCap 7.3 to 3,373.6 and the Techmark 100 41.57 to 3,446.63. Over the week, the 100 index was up 2.9 per cent - with a lot of help from Vodafone - the 250 up 0.4 per cent, the SmallCap 0.6 per cent and the Techmark 1.6 per cent.
Next week could be a crucial one for the UK market with data due on retail inflation and average earnings. The Bank of England, having left rates on hold this week, is due to produce its quarterly inflation report next month and will be looking to see if the recent slowdown in earnings growth has been maintained.
Many analysts hope that the FTSE 100 index can break out of the 6,000-6,600 range once it is clear that interest rates on both sides of the Atlantic have peaked.
The UK market has failed to outperform both continental equities and its domestic bond market for several years now, says Kevin Gardiner, European strategist at J.P. Morgan.
He says the reasons for the poor performance have been threefold. "Earnings growth has fallen far behind that available in Europe, the big improvement in monetary credibility has improved the relative performance of the gilt market vis-a-vis equities, and the flow of funds has favoured gilts thanks to the budget surplus and the minimum funding requirement."
