Investor cheer over UK and European bank rescue plans helped London’s leading share index soar more than 8% today in its second-ever biggest one-day gain.
The FTSE 100 Index surged 324.8 points ahead to 4256.9 as blue chips recovered most of Friday’s devastating near-9% fall.
Heavily-weighted miners and energy companies led the charge after commodity prices ticked up, with European indices also rallying strongly.
Banks experienced mixed fortunes today as the wider market raced ahead in response to the British government’s £37bn (€47.47bn) banking rescue plan.
Royal Bank of Scotland, HBOS and Lloyds TSB – the three banks being thrown a massive funding lifeline from the government – were all nursing sizeable losses. But Barclays and HSBC, which are not using government funds, were on the front foot.
Meanwhile, New York’s Dow Jones Industrial Average also advanced strongly in early trading, up more than 6% after last week’s turmoil.
And across Europe, the CAC 40 in France and the Dax in Germany both gained more than 11%.
In London, banking shares were volatile as traders worked their way through today’s blizzard of information from the sector.
HBOS was the biggest faller, down 28% or 34.2p to 90p, after Lloyds TSB revised the terms of its takeover and the mortgage giant reported a deterioration in trading conditions.
Lloyds was also lower following a drop of more than 14%, down 27.4p to 162p after earlier rising 11%.
Both banks’ existing shareholders are set to see their stakes diluted as a result of the government’s rescue package.
Shares in RBS, which could end up getting £20bn (€25.67bn) in government funding, were experiencing a rollercoaster ride as traders digested the possibility that around 60% of the company could soon be in public hands. Dividend payments have also been ruled out for the foreseeable future.
RBS shares fluctuated between positive and negative territory before settling 8% lower or 6p at 65.7p.
Barclays, which plans to boost its capital position through its own means, was 4% higher, a gain of 7.75p to 215.25p. HSBC rose 59.25p to 849.25p as it is not part of today’s bail-out announcement.
Outside the banking sector, tour operator TUI Travel was thrust near the top of the risers board amid talk its German parent company could seek to buy the remaining stake in the UK operation.
The group said it had received no approach, but was forming an independent committee to “consider the merits of such a proposal if one is made”.
Oil prices rose off recent year-lows to more than 82 dollars a barrel at one stage, helping BP rise more than 11% or 42p to 418.25p. Rival Royal Dutch Shell also firmed 107p to 1387p.
Retailers were also enjoying a recovery after last week’s turmoil. Fashion retailer Next was up 11%, or 99.5p to 1047p, with Marks & Spencer adding 13.5p to 231.5p.
The FTSE’s biggest risers were Schroders up 220p at 900p, Kazakhmys ahead 74p at 408.5p, TUI Travel up 40.25p at 232.25p and Standard Life up 44.25p at 260p.
The four biggest fallers were HBOS down 34.2p at 90p, Lloyds off 27.4p at 162p, RBS down 6p at 65.7p and Fresnillo down 2p at 209p.