Footsie up as interest rate fears ease

Interest rate worries showed signs of easing today after the FTSE 100 Index jumped 70 points and investors prepared for a strong start on Wall Street.

Spirits have been lifted by expectations that the US Federal Reserve will restrict its latest increase in borrowing costs to quarter of a percentage point tonight, rather than the half-point some had feared.

The Footsie stood 67.8 points higher at 5746.4 by mid-morning, a jump of more than 1% after strong gains from mining stocks and insurers.

New York markets finished in positive territory last night and were expected to open higher later today.

The easing of interest rate worries helped mining stocks, which normally come under pressure when borrowing costs rise and the impact is felt on world growth.

Antofagasta rose 12p to 407p and Xstrata lifted 48p to 1926p, while Vedanta Resources added 22p to 1274p and Lonmin cheered 55p to 2776p.

Insurers were also strong with Prudential up 17p at 591.5p, Friends Provident 5p stronger at 175.25p and Norwich Union owner Aviva 18.5p higher at 760p.

And PartyPoker owner PartyGaming topped the risers board after a newspaper report said it planned to enter sports betting, possibly through acquisitions. Shares were 3%, or 3.5p, stronger at 117p.

Drinks giant Diageo was one of three Footsie fallers, down 11.5p at 899p, even though its forecast of 6% annual sales growth impressed analysts. Despite the performance, concerns were focused on the company’s bottom-line performance.

Among mid-cap stocks, Hovis-to-Bisto group RHM cheered investors by revealing the early signs of a turnaround for its Mr Kipling cakes business. Shares were at the top of the FTSE 250 Index risers board with a gain of 7%, or 19.5p to 284p.

Hotels group De Vere was another on the way up, lifting 17.5p to 863.5p, after hotels boss Richard Balfour-Lynn improved his takeover offer to 850p a share, or £745.4 million. The increase in the share price reflected hopes that private equity firm Permira may emerge with a higher offer.