FTSE 100 near 5-year high on strong service sector showing

The UK's benchmark share index closed the week at a five-year high on the back of strong signals from the mammoth service sector as also positive cues from US job figures.

The blue-chip FTSE 100 index stood 0.9 per cent, or 60.75 points higher, at 6,521.46 points.

In a further sign of a pick-up in the economy, the keenly followed PMI survey showed that UK service firms saw their biggest increase in activity for eight months in April, boosted by the sharpest growth in sales in nearly a year.

The survey's headline reading was up at 52.9 for the month against 52.4 in March, where any reading over 50 indicated an expansion in activity. The sector, which accounts for three-quarters of the UK's economy in official figures, had seen growth in each month of the year so far, the surveys revealed.

In a separate development, US officials said a net 165,000 jobs were created in April, which was above expectations, while the previous two months' weak figures were also revised upwards, which helped bring the unemployment rate for the world's biggest economy down to its lowest in four years, at 7.5 per cent, easing fears over an economic slowdown.

While the blue-chip FTSE 100 index rose 0.9 per cent, or 60.75 points, to 6,521.46 points, its highest close since it touching a five-year peak on 14 March, on Wall Street, the Dow Jones Industrial Average rose 142.38 points to a record 14,973.96, after overtaking the 15,000 mark earlier for the first time.

According to the Chartered Institute of Purchasing & Supply, services firms – accounting for more than three-quarters of the economy, from IT to accountancy and hotels to restaurants – enjoyed their best growth since the Olympics last month. The CIPS is a keenly watched activity index, where a score over 50 indicated growth, rose to 52.9 in April from March's 52.4.

The upbeat survey marked a hat-trick of good news following similar positive signs from builders and manufacturers in April. The first quarter of 2013 saw the UK avoid a triple-dip recession.

According to Chris Williamson, chief economist at the survey compilers Markit, a broad-based improvement was becoming evident in the UK economy, greatly reducing the likelihood of the Bank of England seeing any need to increase its asset purchases in the immediate future.