Markets surge as interest rate fears subside

London's leading shares shot deep into positive territory in the afternoon session as Wall Street raced ahead following positive comments from Federal Reserve chairman Ben Bernanke.

Mr Bernanke's testimony to the Senate banking committee included a passage about inflation cooling off as the year progresses. That was taken by the market to mean that the Fed's campaign of interest rate rises is at an end. The Dow Jones index was up almost 150 points by the close of trading in London.

Coupled with the minutes of the last meeting of the Bank of England's monetary policy committee - which showed that all seven members of the committee supported the recent decision to leave rates on hold - Mr Bernanke's comments helped the FTSE close up 96.3 points at 5,778 points.

Just three of the top 100 stocks posted decline by the close of trading in London while the FTSE 250 was up a mammoth 215.6 points at 9,184.4 points.

Tate & Lyle rose 18p to 647p after chairman Sir David Lees told shareholders at the company's annual meeting that first quarter results are "well ahead" of last year, while Corus added 15.75p to 418.75p as vague talk that the steel maker could get a bid approach did the rounds again.

Another perennial bid target, Centrica, added 5.25p to 282.25p as JP Morgan upped its recommendation on the stock to overweight from underweight.

BT added 4.75p to 231.5p as analysts realised that regulator Ofcom's decision to abandon the controls placed on the retail prices BT can charge consumers, will give it more competitive freedom.

BSkyB added 13.5p to 531p as analysts poured over yesterday's broadband announcement. In a note Credit Suisse described the company's push into residential broadband as "bigger, bolder ... but more costly". The broker, which has a neutral stance on the stock, adds that the move is largely a defensive one, pointing out that the market seems to be assuming "static competition and technology evolution".

The dangers inherent in that assumption are obvious, given this morning's announcement from Carphone Warehouse. Having lost the rights to call its 'free' broadband offer 'free forever' the company has gone back on the attack: dropping the price of its basic calls package by £1 - to £8.99 a month - and dumping the £29.99 connection fee. Sign up to this package and customers also get broadband bundled in for nothing. Carphone Warehouse bounced back 19.75p to 283.25p.

The online gaming sector was given a boost in early trading as an industry website reported that BetOnSports has reached a deal with the Department of Justice which could pave the way to it re-opening for business. Unfortunately this was, frankly, news to the company itself and the sector lost its bounce in the early afternoon.

But the rampant rise of the rest of the market was enough to send PartyGaming racing to the top of the FTSE 100 leaderboard by the close, up 9p at 94.25p.

The three FTSE 100 losers, incidentally, were BP, down 3.5p at 631p, Scottish & Southern Energy, down 3p at 1,163p and BOC Group, down 1p at 1,599p.

Ashtead added 8.5p to 155.75p after the plant hire specialist snapped up US rival NationsRent in a deal worth $1bn. The company is paying $600m in cash and assuming $400m in debt. To fund the deal Ashtead is launching a rights issue on the basis of three shares for eight existing shares priced at 100p each to raise £150m.

Ashtead already has a US business - Sunbelt Rentals - and merging the business with NationsRent will produce America's third largest equipment rentals firm.

Elsewhere among the second line stocks, LogicaCMG rose 7.25p to 167.5p. Yesterday, rival IT consultancy Atos Origin announced a drop in first half sales and warned it would miss current sales forecasts for the whole year because of delays to new business in the UK. That sparked concerns that LogicaCMG's trading update today would be similarly downbeat.

In fact, LogicaCMG said this morning that trading in the first half was well ahead of last year and the integration of its recently acquired French business - Unilog - is on track. "Overall, our expectations for the year remain unchanged," said bearded boss Martin Read.

The company has not, however, been immune to the downturn experienced by Atos Origin. In the first half of the current year, LogicaCMG's UK revenue was slightly below last year.

Finally, shares in Russian state oil company Rosneft failed to sparkle on their London debut this morning. The shares themselves have been trading in Moscow since yesterday. Rather than list primary shares in London, which would mean Rosneft had to comply with a whole truckload of corporate governance rules, the firm has listed Global Depositary Receipts. Listed at $7.55, they closed at $7.54.