UK8217;s FTSE up 2.4 pct

The index,however,was down 7.2 percent on the month in which the U.S. lost its triple-A credit rating. Without the final day surge,August could have been the FTSE8217;s worst month since the collapse of Lehman Brothers in 2008.

Throughout August,worries over the health of the global economic recovery and the lack of unity shown by governments worldwide in tackling the slowdown have dented investor appetite for riskier assets such as equities.

With fiscal policy nowhere,investment bankers are being forced to take on the role of sorting out the economy because politicians can8217;t,Louise Cooper,markets analyst at BGC Partners,said.

I think there will be QE3 more quantatitive easing. It will bounce the markets although not as much as last time and I don8217;t think it sorts out the underlying problem which is we have too much debt.

On Wednesday,the economic data continued to fall foul of market expectations as UK consumer confidence fell to its lowest level in four months in August.

In the U.S.,a midwest business barometer fell to a near two-year low,while the pace of U.S. private sector job growth slowed in August for the second month in a row.

Analysts at Exane BNP Paribas became the latest to cut their world GDP forecasts,reducing global growth estimates to just 3.8 percent for 2011 and 3.7 percent for 2012.

The troubling data and downgrades are concerning policymakers and the minutes released on Tuesday from the most recent Fed board meeting indicated several policymakers backed further monetary easing to support growth.

What we learned from the minutes was that 8216;a few members8217; had wanted even more aggressive action at the August meeting,but accepted the language change as a 8216;measured8217; step in that direction,analysts at RBS said

This development is likely to fuel hopes for further easing in September.

RISK ON 8230; FOR NOW

Further quantitative easing would likely lead to lower interest rates for longer,which tends to spur lending,spending and economic expansion.

Lower rates also suppresses appetite for other asset classes such as cash and bonds,and fuel demand for riskier assets such as equities,with smashed down mining and oil and gas shares being picked up on the cheap.

Thomson Reuters Datastream showed the FTSE 100 carrying a one-year forward price-to-earnings of 9.9,against a 10-year average of 14.1.

Commodities trader Glencore rose 5.5 percent,while global miner Xstrata added 5.2 percent.

Building supplies firm Wolseley climbed 5 percent in light volumes as Exane BNP Paribas raised its rating on the firm to outperform on valuation grounds,but in the same note cut its rating and earnings estimates on the European building materials sector on concerns over slowing growth.

Elsewhere,Smith amp; Nephew ,the maker of artificial knees and hips,rose 4.9 percent,as long-standing bid talk was reheated with U.S. rivals Stryker Corp and Biomet mentioned in press reports as potential suitors.

On the downside,British Land shed 0.9 percent after double-downgrades for both by Morgan Stanley in a cautious review of the European real estate sector.

Schroders dropped as Citigroup downgraded its rating for the firm to hold from buy in a downbeat review of the UK asset management sector.

BGC8217;s Cooper noted utilities,such as Unitied Utilities and Severn Trent ,are trading at 12 times PE,unusually,more expensively than the market.

I remember in bull markets of the 1990s this sector trading at around half the market8217;s PE,Cooper said.

So utilities,by trading at a market premium shows,like the soaring gold price and the strength of the Swiss Franc,how investors are willing to pay for safety.

UK8217;s FTSE gains,but confidence fragile

Hopes for another stimulus package from the US central bank drove an advance on Britain8217;s top share index on Wednesday,although traders questioned the sustainability of the rally given the weakening economic backdrop.

The FTSE 100 had risen 51.69 points,or 1 per cent,to 5,320.35 by 1136 GMT,albeit in thin volumes,at 30.8 per cent of the 90-day average.

The mood has darkened on both sides of the Atlantic.

A survey in the UK on Wednesday showed that confidence among British consumers fell to its lowest level in four months in August,a sign they will keep a tight rein on spending,hampering a fragile economic recovery.

This followed US figures on Tuesday showing consumer confidence slid in August to its lowest level in two years which,along with minutes from the latest Federal Reserve meeting,cemented a growing belief the Fed will have to intervene with aggressive steps when it meets in late September.

The consumer8217;s in debt up to its eyeballs,and you can8217;t spend what you haven8217;t got,Michael Hewson,analyst at CMC Markets,said.

And against a backdrop of slowing growth and rising unemployment,I don8217;t think consumers really have an awful lot to be confident about at the moment.

Concerns over the strength of the global economy,coupled with the European sovereign debt crisis,have in fact put Britain8217;s top share index on track for its biggest monthly fall since October 2008,just after the collapse of Lehman Brothers.

Investors were readying themselves for a batch of US data,including the ADP National Employment survey for August at 1215 GMT 8212; a key precursor to Friday8217;s crucial August jobs report,which could intensify investors8217; belief in further US stimulus.

US stock index futures pointed to a higher opening on Wall Street on Wednesday.

We might be in a position where bad news is actually positive because it might force the Fed to be a bit more QE-focused when they meet in September,Mic Mills,head of electronic trading at ETX Capital,said.

To reflect a new,more subdued second half of the year,Citigroup has amended forecasts and price targets for UK asset managers,with Schroders among the biggest blue-chip casualties,off 1.6 per cent,as the broker cut its rating to hold.

Short term: Falling markets mean lower AUM,lower management fees,lower performance fees,Citi said in a note.

Longer term,down markets and high volatility increase investor fear,leading to subdued and/or negative fund flows. We expect this to delay AUM assets under management and revenue recovery,even if markets recover swiftly from here.

The broker said that,for a falling market,its top picks would be Man Group,citing its flagship AHL fund as a catalyst,and midcap Ashmore,which Citi lifted to buy on valuation grounds.

Shares in the pair enjoyed respective gains of 1.7 per cent and 1.6 per cent,with Man Group also given a fillip,according to traders,from a Morgan Stanley upgrade to overweight.

British Land and Land Securities shed 2.2 per cent and 1 per cent respectively,with traders citing the impact of double-downgrades for both by Morgan Stanley in a cautious review of the European real estate sector.

Mining stocks were the main force behind the UK blue-chip index8217;s rise,building on an advance from the previous session as bargain hunters moved in on the beleaguered sector which has fallen nearly 12 per cent in August.

Smith amp; Nephew was the standout individual performer,up 5.1 per cent and extending Tuesday8217;s gains,as long-standing bid talk was revived and after Deutsche Bank initiated coverage with a buy rating on Tuesday.

US rivals Stryker Corp and Biomet were mentioned in press reports as possible suitors for Smith amp; Nephew,which reportedly attracted the interest of Johnson amp; Johnson late last year before it bought Switzerland8217;s Synthes instead.

Smith amp; Nephew was not immediately available for comment.

Ex-dividend factors clipped 0.25 point off the FTSE 100 index on Wednesday,with Capita ,Serco and John Wood Group losing their payout attractions.