Buoyant banks helped the FTSE 100 Index return to winning ways as shares in state-backed Lloyds Banking Group passed a key threshold today.
The blue-chip index was back on track with a rise of 35.3 points to 6723.1, after suffering its first fall in 11 sessions on Thursday.
Investors were initially spooked by weak economic data in the United States, including a rise in US jobless claims, but the lapse did not last long as the top flight continued to test recent five-year highs.
The UK’s part-nationalised banks led the charge amid further signs they are moving closer to shedding government support.
Shares in 39% state-owned Lloyds rose above the 61.2p level at which the Government would break even on its 2008 bailout, and are now at their highest point for more than two years.
The Treasury is widely expected to begin selling its stakes in Lloyds and 81% nationalised Royal Bank of Scotland before the 2015 general election.
Lloyds shares closed up 3.2% or 1.9p at 62.8p, while RBS was up 18p at 336.8p, a 4% gain.
On the currency markets, sterling fell to a six-week low against the dollar amid growing speculation the US Federal Reserve will call time on its economic stimulus programme.
The pound was worth 1.52 dollars and also lost ground slightly on the euro to 1.18.
Investors keen to capture the dollar’s gains and ride the equities wave also sent the price of gold tumbling for the seventh straight day, with gold futures trading for 1363 US dollars an ounce.
In other corporate news, Morrisons’ long-awaited entry into online grocery shopping also caused excitement after a big jump in shares of distribution partner Ocado.
The internet delivery firm surged by around 50% at one stage after Morrisons said it will make an initial payment of up to £170 million for the right to use Ocado’s Warwickshire distribution centre.
Morrisons was also 3.9p higher at 286.5p after the announcement that it will start internet food deliveries by the end of this year.
ETX Capital strategist Ishaq Siddiqi said: “For Ocado, the investment expands the company’s operations and balance sheet, helping the company launch new centres.”
Ocado’s shares later settled at 274.1p, a gain of 36% or 72.2p.
At the other end of the FTSE 250 Index, newspaper distribution and airport ground handling firm John Menzies slipped as much as 5% after it issued a disappointing trading update.
Most parts of the business have performed in line with expectations, but sales in the magazine market have been poor with weekly titles particularly affected by declining volumes and title closures.
With no expectations for an improvement during the remainder of the year, Menzies shares were down 29.5p at 762p.
In other trading updates, testing services firm Intertek fell after it said declining revenues from the mining sector had impacted on margins. The FTSE 100 stock was 67p lower at 3385p.
The biggest risers on the FTSE 100 were Royal Bank of Scotland, up 18p at 336.8p, Resolution up 11.4p to 296.8p, Lloyds Banking Group up 1.9p at 62.8p and GKN 9.3p ahead to 305.8p.
The biggest fallers on the FTSE 100 were Eurasian Natural Resources, 23.7p down at 271.6p, Randgold Resources off 145p at 4757p, Weir Group 71p lower to 2399p and Amec off 28p at 1044p.