FTSE rallies despite interest rate fears

The prospect of another interest rate rise next month failed to keep investors away from the London market today.

Bargain hunters looking for cheap stocks after yesterday’s 70-point fall kept the FTSE 100 Index above its opening mark, 23.9 higher at 4330.2 by mid-morning.

News of robust growth by the UK economy in the second quarter led analysts to predict a hike in interest rates next month.

Official figures showed the economy grew by 0.9% in the last quarter and 3.7% year-on-year – the highest rate of annual growth in four years.

The modest rally by the Footsie was helped by a late buying spree in New York, where the Dow Jones Industrial Average closed above the 10,000 barrier.

Most of the financial stocks were in positive territory, but the gains were far from enough to reverse the losses of the previous session.

Royal Bank of Scotland was up 6p to 1518p, Barclays gained a penny to 445p and Abbey National added 1.5p to 494.5p.

Pharmaceutical companies were also helping to prop up the Footsie with AstraZeneca ahead 44p at 2421p after posting strong results yesterday. Rival GlaxoSmithKline, which updates the market next week, gained 13p to 1080p.

Mining group Anglo American, which owns 45% of precious stones group De Beers, cheered 20p to 1117p after De Beers carved out a 2.2% increase in half-year sales to $2.98bn (€2.4bn).

In contrast, British Airways was the heaviest Footsie faller, losing more than 1% or 3.25p to 235p.

The airline said today that its staff were poised for annual bonuses of around £1,000 (€1,500) if it improves margins sufficiently.

Outside the top flight, pub company Yates advanced half a penny to 131.5p after private equity group Thorium said it was battling on with its controversial £93m (€140m) takeover bid.