Interest rates hopes drive FTSE upwards

Hopes of lower interest rates on both sides of the Atlantic drove the FTSE 100 Index sharply higher today.

Traders appeared confident the US Federal Reserve will cut rates by at least quarter of a point on Wednesday and possibly spark a copycat move by the Bank of England a day later.

As a result, the Footsie was close to its high point for the session at 4118 - a leap of 121 points by lunchtime.

The mood was further helped by a strong close to the week on Wall Street on Friday and hopes that the Dow Jones Industrial Average will continue its upward spurt later today.

In London, investors returning to the hi-tech, media and financial sectors were particularly attracted to market heavyweight Vodafone.

The mobile phone giant enjoyed one of its best sessions for some time – up 7%, or 7.25p at 106.5p – while rival mmO2 followed suit with a gain of 3.5p to 49.75p.

The former BT subsidiary was further helped by the launch of its new Revolution mobile phone service today.

Among media stocks, pay-TV broadcaster BSkyB added 49p at 624p and news and information group Reuters rose 11.75p to 196.25p.

And in the financial sector, insurer Royal & Sun Alliance gained 5.75p at 109.75p.

It was making up for lost ground after Friday’s battering, when reports it was facing an asbestos-related lawsuit took 10% off the shares.

Banks were lifted by hopes of lower interest rates as HBOS rose 30p to 728p, and Lloyds TSB put on 35p at 572.5p. Elsewhere, engines giant Rolls-Royce recovered some of its recent losses to add 12.25p at 115p.

The upbeat mood was supplemented by positive sentiment in the travel sector following results from Ryanair and airports operator BAA.

BAA gained 4% – up 21.5p at 576.5p – as it reported passenger numbers had nudged up over the last six months.

However, the company added that it remained hard to predict the pace of recovery amid the current uncertain conditions.

Ryanair – a FTSE 250 stock – surged 14% or 58p to 477.5p following record half-year profits and took its competitors with it as British Airways gained 8%, or 11.75p to 155p, and easyJet lifted 24.5p to 368.5p.

Outside the top flight, restaurants group Pizza Express put on 7% or 21p at 341p after it revealed it had received a takeover approach.

The unnamed suitor is offering between 330p and 350p a share, valuing Pizza Express at up to £251 million.