FTSE helped higher by fresh activity in UK's largest sector

Fears of a double dip recession were eased by fresh economic data showing an increase in activity in rise in the services sector, the UK's largest sector.

Chris Williamson, chief economist at Markit which compiles the purchasing managers index, said: 'Business activity rose at a faster rate than August, but the survey provided plenty of signs to suggest that this does not represent the start of a renewed upturn, and instead growth is set to remain subdued in the coming months.'

Vicky Redwood, senior UK economist at Capital Economics said the increase will have eased fears of a double dip recession: 'The rise in the main business activity index from 51.3 to 52.8 (consensus 51.0) is the first increase in four months and means that the index is at least consistent once again with positive growth in the biggest part of the economy.'

While economists played down the significance of the data, UK investors took it well with the FTSE 100 up boosted to 5589 points, a 0.6% rise of 33 points.

Investor sentiment had already been improving after reassuring central bank action and comments from Japan, the US and Australia.

Reports on early trading in Asia last night suggested a prevailing negative mood. This changed after Japan’s central bank cut interest rates to stop a strong Yen from slowing economic growth. As part of its monetary policy easing the bank also set up a 5 trillion yen ($60 billion) fund to buy assets including government and corporate bonds.  The fund also has the capacity to hold six times this value of assets in loans.

Meanwhile investors and analysts were surprised by a decision by the Australian central bank to hold interest rates. However the bank did say that a rise was likely to come soon to contain inflation.  

In the US Ben Bernanke, the chairman of the Federal Reserve, made a case for asset purchases saying they lowered borrowing costs suggesting that more buying could ease economic conditions.

In the UK the FTSE 100 was up 0.2%, a rise of 12 points to 5568. The biggest gainers were holiday firm TUI Travel which was up 6p or 2.6% at £2.22, after reporting that bookings were improving. It also said that it was confident its full year results would be in line with previous guidance.

Tesco shares were up 0.85% at £4.34 after reporting strong Asian demand and a 9% gain in first-half earnings and reasssured investors that its its money-losing US stores would be profitable by 2013.

The FTSE 100's biggest faller was the global satelite communications company Inmarsat. Its shares were down nearly 3% at £6.36 after hedge fund Harbinger Capital sold part of its 14% stake in the company.  

Miners were down again after seeing falls yesterday. Five of the FTSE 100's biggest fallers were from the mining sector with Kazakhmys down 3% at £13.79. The company's chairman, Vladimir Kim, sold an interest in 58.9 million ordinary shares, representing about 11% of the shares in issue. The next biggest faller was Antofagasta down 1.3% at £12.08.

The US dollar was worth $1.58 to the pound before the announcement but improved to $1.59, while the Euro stood at €1.15.

The price of gold stood at $1319 per ounce. Oil was trading at $83.5 per barrel.