The FTSE 100 Index started the week on the front foot today as Europe-wide efforts to shore up the banking sector helped steady investor nerves.
A late recovery for Wall Street on Friday also buoyed London after the Footsie lost 9% during a dramatic collapse at the end of last week.
The blue-chip index rose by 210.5 points to 4142.5, a gain of 5% by mid-morning. There were similar gains for markets on the continent after eurozone countries agreed on Sunday to temporarily guarantee bank refinancing and pledged to prevent banks from failing.
There were mixed fortunes for London’s financial stocks after it emerged the government will take sizeable stakes in Royal Bank of Scotland and merger partners Lloyds TSB and HBOS.
HBOS was the biggest faller, down 26% or 32.7p to 91.5p, after Lloyds TSB revised the terms of its takeover and the mortgage giant reported a deterioration in trading conditions. Lloyds was also lower after a drop of 4%, down 8.8p to 180.6p after earlier rising 11%.
Royal Bank of Scotland shares were volatile as traders digested the possibility that around 60% of the company could soon be in government hands, resulting in a major dilution of existing interests. Dividend payments have also been ruled out for the foreseeable future.
RBS shares fluctuated between positive and negative territories before settling 16% lower or 11.2p at 62.2p.
Barclays, which plans to boost its capital position through its own means, was 5% higher, a gain of 11p to 218.5p. HSBC rose 67p to 857p as it is not part of today’s bail-out announcement.
Outside the banking sector, tour operator TUI Travel’s shares were 35.5p higher at 227.5p amid talk its German parent company could raise its stake in the UK operation.