The UK stock market rally continued apace despite, or because of, some rather weak US economic data.

The Chicago purchasing managers' index for the manufacturing sector fell unexpectedly to 38 in July, well below the 50 level that indicates flat activity.

Although other data were rather mixed - consumer confidence was down while personal consumption was stronger than expected - investors seemed to decide that the signs of a weak economy would prompt the US Federal Reserve to cut rates aggressively later this month. "The soft data underpins our view that the Fed still has work to do," said the economics team at ING Barings.

The Dow Jones Industrial Average rose by more than 170 points in early trading, carrying the FTSE 100 index with it and allowing the blue-chip benchmark to close with an 82.45 point gain at 5,529.1. The other indices were also stronger, with the FTSE 250 up 55.3 at 6,082.2, the SmallCap 8.8 ahead at 2,729.4 and the Techmark 100 index gaining 22.04 to 1,573.67.

The rally was broadly-based with only 16 FTSE 100 constituents losing ground over the day. The index has now risen 5 per cent over the last four sessions.

Banks were strong, with soon-to-be-merged Halifax and Bank of Scotland two of the best four Footsie performers as the former reported well-received figures. Domestic economic data showed the continued strength of the housing market with Nationwide reporting that prices rose 10.9 per cent year-on-year. The figures were seen as making it even less likely that the Bank of England's monetary policy committee would cut rates at this week's meeting.

But part of the reason for the market's recent change in mood has been the view that it will be a while before the MPC moves to raise rates. Today's purchasing managers' index for July will be watched very closely for further signs of weakness in the manufacturing sector.

Turnover picked up slightly from Monday's depressed levels but stayed below the two billion mark, with 1.88 billion shares traded by the 6 p.m. count.