FTSE continues to rally

Share prices in London continued their rally today as the prospect of war in Iraq grew.

Hopes of another strong opening on Wall Street this afternoon fuelled the upward momentum as mid-morning gains of almost 40 points doubled by lunchtime.

The FTSE 100 Index was up 78.9 points at 3801.2 by lunchtime today.

Even news that the UK’s underlying inflation rate had risen to 3% last month - its highest level for almost five years – failed to dampen investors’ optimism.

Expectations of an end to uncertainty over the situation in the Middle East which has dogged markets in recent weeks were boosted by US president George W Bush’s 48-hour ultimatum to Saddam Hussein.

The Footsie is now on course for a fourth straight day of gains on top of its strongest three-day performance since the index started in 1984.

The rally helped three companies due to be relegated from the blue chip index.

Engineering group Invensys topped the risers board, lifting 20% or 2.25p to 13.25p, ahead of aerospace company Rolls-Royce which rose 13% or 10p to 86p and British Airways which climbed 13.75p to 123.5p.

BA’s performance also reflected news that low cost operator easyJet would not be buying Deutsche BA. EasyJet soared 14% to 229.5p, a 28.5p gain.

But one discordant note came from the oil sector where price falls of almost three US dollars a barrel today dragged down share prices with BP off 1p at 414p and Shell down 6.5p at 414p.

Troubled defence group BAE Systems lifted 3.5p to 133.5p after announcing more than 1,000 job cuts.

After slipping in early trading Daily Mail & General Trust surged 6% after it said its performance in the first half of its financial year had been encouraging. Shares climbed 27.55p to 507p.

Outside the FTSE 100 troubled telecoms equipment maker Marconi saw its shares lose 9% to 2p, a 0.19p loss. The company has announced a further delay to its long-awaited financial restructuring.

Amongst the biggest gains in the FTSE 520 Index was a 13% rise for troubled Anglo-Dutch steel group Corus, which recovered some ground from recent falls, clawing back 1p to reach 9p.

The biggest faller on the FTSE 250 was retailer Matalan which lost more than a quarter of its value after announcing that differing views over how the business should be run had prompted the departure of its chief executive and retail director.