* FTSE 100 closed up 50.11 points at 6,621.06
* U.S. GDP accelerates to revive flat lining FTSE
* Heavyweight banks and energy stocks lead charge
* Investors toast Diageo as profits rise (updates closing prices)
By David Brett
LONDON, July 31 (Reuters) - The FTSE 100 rallied on Wednesday as the quickening pace of the global economy’s heartbeat revived confidence that economic recovery can be sustained even if stimulus is withdrawn.
Economic growth in the world’s largest economy, the U.S., unexpectedly accelerated in the second quarter, with gross domestic product growing at a 1.7 percent annual rate, stepping up from the first-quarter’s downwardly revised 1.1 percent expansion pace.
“It is not a barn-storming reading by any stretch of the imagination, but shows further momentum in the world’s biggest economy,” Marcus Bullus, trading director at MB Capital, said.
“However GDP is measured, such a strong number sent an instant buy signal to the markets,” he said.
Heavyweight stocks led the charge on London’s blue chip index, which closed up 50.11 points or 0.8 percent at 6,621.06, although off the session high of 6,65.35 with the Federal Reserve’s post-policy meeting announcement due late on Wednesday, which could derail the rally.
“I am now selling on the bounces,” Ed Woolfitt, head of trading at Galvan, said. “Technically, it feels a correction is brewing up.”
Europe’s biggest bank HSBC added 8.5 points to the index with traders citing a switch out of more UK-focused banks following Barclays’ six billion pounds cash call on Tuesday.
Energy shares, which are acutely exposed to the fortunes of the broader economy, contributed 10.6 points to the index’s gains, with oil major BP up 0.7 percent boosted by upbeat comment from BofA Merrill Lynch and JP Morgan post results.
Although the economic recovery in Europe and the UK is still lagging, there have been signs of life in the data in recent weeks, which has given some fund managers more confidence.
“This is a theme we have been playing in portfolios since the beginning of this year; adding companies which have high exposure to Europe and should benefit from any improvement in GDP growth,” Andrew Arbuthnott, head of European large cap equities at Pioneer Investments, said.
“Q2 earnings to date have been lacklustre at best but we believe the market is really looking through these numbers and expecting an improvement in quarters to come,” he said.
Although only a small sample size, 75 percent of UK-listed companies have either beaten or met expectations in the current quarter, compared with just 52 percent of European companies.
Diageo rose 3.2 percent after posting an 8 percent rise in annual operating profit.
Oil explorer Tullow climbed 1.1 percent after a successful drill at its Etuko-1 well in Kenya. [ID:nL6N0G11XB
Centrica added 1.3 percent after reporting higher first half earnings. (Reporting by David Brett; editing by Ron Askew)