Blues chips boost FTSE

Blue chips were back on a tentative road to recovery today as the London market enjoyed its second day of gains, buoyed by hopes of a US interest rate cut.

The FTSE 100 Index closed up 79.8 points at 6212 with investor nerves soothed by firm US GDP figures and suggestions America may see a rate cut next month.

US Federal Reserve chairman Ben Bernanke said that the Fed was “closely monitoring” market conditions and would “act as needed”.

Energy stocks added their weight to the Footsie risers after a lift in oil prices following a sharper-than-expected drop in US inventories.

BG Group led the pack – helped by a broker upgrade from Dresdner Kleinwort - with a 4% gain, or 32p to 782p, Royal Dutch Shell was 42p higher at 1900p and BP rose 8.5p to 551p.

Pub group Punch Taverns lifted 27p to 1081p after an upbeat note from Numis Securities, which despite lowering its price target for the group, said it remained an “attractive buying opportunity”. Enterprise Inns also fared well, up 19.5p at 634.5p.

Brewer Diageo, the group behind Guinness, rose on full-year results showing diversification and a marketing push for Guinness helped offset weaker UK volumes. Shares saw a 24p hike to 1042p.

Lambert & Butler cigarette group Imperial Tobacco was 36p ahead at 2171p after Altadis, which it is set to acquire in a £11 billion takeover deal, reported a 27% increase in first half profits.

Also on the takeover front, Britain’s third largest supermarket Sainsbury’s was up 11.5p at 551.5p after reports suggested that Delta Two had offered to increase the proportion of equity in its bid proposal. The move is said to have seen Sainsbury’s step closer to opening its books to the Qatari-backed fund.

Currys owner DSG International topped the list of share fallers, down 2.5p at 154.8p, as the company reported a 6% rise in first quarter like-for-like sales, but remained cautious on its full year outlook.

B&Q owner Kingfisher also saw losses, down 0.5p at 207p.

US sub-prime mortgage woes returned to hamper financial stocks after predictions that investment banks could see large falls in profitability in the second half of the year.

Barclays was off 2.5p at 597.5p as a result, while HBOS was down 2p at 861p.

In the FTSE 250, Mecca Bingo owner Rank leapt nearly 9%, or 13.5p, to 167.75p after England’s smoking ban introduced on July 1 had a lower than expected impact on revenues.

Moving in the opposite direction, oil equipment and services group Hunting slumped 55p to 700p, a loss of almost 8%, after the weak US dollar impacted its half year figures.

The biggest Footsie risers were BG Group up 32p at 782p, Liberty International up 43p at 1180p, SAB Miller ahead 45p at 1326p and Enterprise Inns up 19.5p at 634.5p.

The biggest Footsie fallers were DSG International off 2.5p at 154.8p, Barclays down 2.5p at 597.5p, Kingfisher down 0.5p at 207p and HBOS down 2p at 861p.