The FTSE 100 closed higher on Thursday as bond yields cooled and data showed that UK services activity grew at its fastest pace in four months in August.

The FTSE 100 index closed up 75.07 points, 0.7%, at 10,831.52. The FTSE 250 ended up 172.07 points, 0.7%, at 24,496.13, and the AIM all-share closed up 9.80 points, 1.2%, at 799.81.

“A measure of calm in government bond markets and a slight moderation in oil prices helped steady markets,” said AJ Bell investment director Russ Mould.

The yield on the US 10-year Treasury was quoted at 4.75%, narrowed from 4.79% on Wednesday. The yield on the US 30-year Treasury was quoted at 5.23%, down from 5.27%.

In the UK, the yield on 10-year gilts eased to 5.16% from 5.24% on Wednesday, while the 30-year dropped to 5.80% from 5.87%.

Supporting UK equities, a report showed UK services activity grew at its fastest pace in four months in August, although the final reading was weaker than initially estimated and inflationary pressures picked up.

The seasonally adjusted S&P Global UK services purchasing managers’ index rose to 52.5 points in August from 52.1 in July, but came in below the flash estimate of 52.8.

Nevertheless, the reading remained above the 50-point mark separating growth from contraction, and was the highest since April.

New business increased for a second consecutive month amid signs of improving business and consumer spending and investment sentiment. However, export sales fell for a sixth successive month amid weak European demand and geopolitical uncertainty.

The S&P Global UK composite PMI also rose to 52.5 points in August from 52.2 in July, matching the earlier flash estimate and reaching its highest level since April.

The data followed figures earlier in the week showing that the UK manufacturing PMI reached a five-month low of 51.7 in August, down from 51.9 in July, although it was above the flash estimate of 51.5.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said PMI data over July and August is consistent with quarter-to-quarter GDP growth of 0.2% in the third quarter, down from 0.4% in the second quarter, but still above the Monetary Policy Committee’s forecast for a rise of just 0.1%.

“What’s more, GDP growth has consistently outperformed the PMI for the past year or two as uncertainty overly depresses the survey relative to actual output,” he added.

Brent crude for November delivery was quoted at 96.83 dollars a barrel at the time of the London equities close on Thursday, up from 95.40 at the time of the London equity close on Wednesday.

In European equities on Thursday, the Cac 40 in Paris closed up 0.1%, while the Dax 40 in Frankfurt ended 0.6% higher.

In New York, equity markets rallied. The Dow Jones Industrial Average was up 1.2%, the S&P 500 was 1.0% higher, and the Nasdaq Composite climbed 1.3%.

The gains came as two reports showed activity in the US service sector accelerated in August, despite ongoing elevated prices.

According to S&P Global, the US service sector saw business activity growth accelerate midway through the second quarter, hitting a 20-month high in August. The upturn in activity was supported by a stronger rise in new business, with growth reaching its fastest pace since December 2024.

The headline S&P Global US services purchasing managers’ index business activity index posted 56.5 in August, down from the ‘flash’ reading of 56.8, but up from 54.6 in July.

The ISM services PMI registered 55.4 in August, up from July’s figure of 54.1, and ahead of the FXStreet consensus of 54.3.

The focus in the US now switches to Friday’s nonfarm payrolls report, which Kathleen Brooks, research director at XTB, said could “seal the deal” on a September rate hike from the Fed.

“There is already a 62% chance of a hike priced in, but a stronger than expected payrolls reading, that bucks the trend of recent lower jobs growth in the US, could see this rise even further,” she stated.

According to consensus cited by FXStreet, Friday’s official data is expected to show the US added 58,000 jobs in August, after shedding 23,000 in July.

The jobs report comes ahead of next week’s US inflation data. Ahead of that, US Federal Reserve governor Chris Waller said he would be prepared to vote for an interest rate hike at the central bank’s next meeting in mid-September if data showed inflation having accelerated.

“My decision on the appropriate stance of policy will be heavily influenced by what we learn about August inflation,” Mr Waller told Reuters.

The pound was quoted at 1.3536 dollars on Thursday, up from 1.3505 on Wednesday. Against the euro, sterling was essentially flat at 1.1646 euros from 1.1648.

On the FTSE 100, Prudential rose 3.5% as Berenberg started coverage with a “buy” rating, while the stronger gold price supported Endeavour Mining and Fresnillo, up 3.6% and 2.9% respectively.

Gold was quoted at 4,506.91 dollars an ounce, up from 4,371.82 on Wednesday.

On the FTSE 250, Hilton Food jumped 12% as it raised full-year guidance despite reporting lower half-year profit as issues at its Dutch smoked salmon producer business, Foppen, offset progress elsewhere.

For 2026, Hilton Food expects adjusted pretax profit from continuing operations of £66 million to £71 million, up from £60 million to £65 million before.

WPP rose 5.6% as it was seen as a beneficiary of reports that PepsiCo has picked fellow advertising firm Publicis – which rose 4.4% in Paris – for its global media account, moving away from Omnicom.

Analysts at Bank of America said the PepsiCo win means Publicis “will now withdraw from Coca-Cola’s pitch, where it was facing incumbent WPP”.

“We think it unlikely that Omnicom will be invited to pitch, given it remains on PepsiCo’s roster, while other agencies are unlikely to be sufficiently scaled. WPP is also well placed to recapture the US portion it lost to Publicis in 2025,” BofA said.

The biggest risers on the FTSE 100 were Metlen Energy & Metals, up 1.82p at 48.44p, Informa, up 34.20p at 912.80p, London Stock Exchange Group, up 330.00p at 8,898.00p, Endeavour Mining, up 163.00p at 4,722.00p and Prudential, up 35.00p at 1,038.50p.

The biggest fallers on the FTSE 100 were Reckitt Benckiser, down 146.00p at 5,080.00p, Convatec, down 6.20p at 227.40p, Admiral, down 98.00p at 3,836.00p, Haleon, down 8.40p at 357.60p, and Diageo, down 26.50p at 1,666.50p.

Friday’s global economic calendar has the US jobs report, Canada unemployment data, eurozone retail figures and a batch of construction PMI surveys, including the UK at 0930 BST.

Friday’s UK corporate calendar has no significant events scheduled.

Contributed by Alliance News