Blue chip banks roared higher today on news that Basel 3 regulatory reforms were set to be watered down.
Part-nationalised Lloyds Banking Group led the charge with a gain of 9%, while Royal Bank of Scotland and Barclays soared 8% as investors cheered the prospect of more lenient restrictions on capital standards in the sector.
With decent results from UBS helping the positive sentiment, the FTSE 100 Index rose 14.6 points to 5365.7 despite huge second quarter losses for oil giant BP.
Wall Street’s Dow Jones Industrial Average struggled to make headway as figures showed consumer confidence at its lowest since February, which offset more decent earnings figures – this time from chemicals giant DuPont.
The pound hit a fresh five month high against the dollar – to more than 1.55 dollars – as sterling continued to strengthen, helped by robust UK retail sales.
But it was BP in London grabbing the headlines once more.
Shares fell 11p to 406p after it plunged into the red for the first time in 18 years following a massive $32.2bn dollar (€24.8bn) provision for the Gulf of Mexico oil spill.
Investors also had to digest the resignation of chief executive Tony Hayward and details of the company’s plans to sell $30bn (€23bn) in assets as it looks to concentrate on higher growth exploration and production.
But fresh from its clean bill of health after last week’s European stress tests, UK bank stocks were making the running.
Barclays jumped 23.9p to 339.6p, while Lloyds Banking Group lifted 5.8p to 71.8p and Royal Bank of Scotland surged 3.7p to 50.4p.
There was also a rise of 25p to 552.5p for insurer Prudential and a gain of 8.4p to 363.5p for rival Aviva.
The biggest fall in the top flight came from InterContinental Hotels after the billionaire Barclay brothers offloaded their 10% stake in the company. The stock fell 7% or 89p to 1110p after the placing by Barclays Capital on behalf of the brothers, who own the Ritz hotel and the Daily Telegraph.
Outside the top flight, Halfords shares fell 4% after it reported a 2.1% drop in first quarter like-for-like sales, in part due to one-off factors such as the World Cup and political uncertainty. The figure was higher than the 1.5% decline expected in the City and meant the stock fell 18.7p to 497.8p.
There was also a drop of 4% for Imperial Leather soap firm PZ Cussons, even though it posted a 15% rise in full-year profits to £101.8m (€122m).
Shares were under pressure – off 16.1p at 343.9p – due to the company’s cautious comments about trading prospects.
Meanwhile social housing firm Connaught, which slumped 69% yesterday on funding worries, bounced back 7% or 2.2p to 33.7p.
The biggest Footsie risers were Lloyds Banking Group ahead 5.8p to 71.8p, Royal Bank of Scotland up 3.7p to 50.4p, Barclays up 23.9p to 339.6p and Prudential up 25p to 552.5p.
The biggest Footsie fallers were Intercontinental Hotels down 89p at 1110p, Randgold Resources off 235p to 5700p, Aggreko down 59p to 1543p and Burberry down 31.5p to 852.5p.