FTSE makes strong gains

London’s blue-chips made firm advances today as financial and housebuilding stocks returned to form.

Positive sentiment helped the likes of Alliance & Leicester and Northern Rock to strong gains, while housebuilders under pressure amid recent concerns over a slowing market also surged ahead.

The FTSE 100 Index closed 53.4 points higher at 6486.4 – despite fresh news of tumbling housing sales in the US today, as markets weighed up another possible rate cut from the US Federal Reserve.

Alliance & Leicester topped the leader’s board, up more than 8%, or 62p, to 795p after broker comment that the shares looked cheap following the recent financial turmoil.

Crisis-hit Northern Rock was also 11.5p higher at 193.5p on talk that private equity firms JC Flowers and Cerberus had been given access to its books and a Spanish investor had made an offer for 10% of the business.

Fellow lender Halifax Bank of Scotland rose 43p to 916p while FTSE 250 stock Bradford & Bingley – also a UBS pick – was up 18.75p at 310p.

In the top flight, housebuilders were firmly among the Footsie risers after an upbeat note from Citi analysts on Barratt Developments soothed market concerns over the effect of the Northern Rock crisis on its sales.

Barratt rose 27p to 753p, Persimmon saw a 43p hike to 953p and Taylor Wimpey surged 17p to 275p.

Meanwhile flagship carrier British Airways’ shares took off after it placed its largest order for new planes for nearly 10 years.

Shares rose more than 4%, or 15.25p, to 384.25p. Rolls-Royce, which will power the 12 Airbus 380s and 24 Boeing 787 Dreamliners on order, also felt the benefit, up 3p at 524p.

Among retailers, Marks & Spencer gained 4%, or 24p, to 612.5p after rumours of a bid in the offing. The wider sector also made progress as a CBI survey showed September sales above the average levels seen last year. Currys owner DSG International – heavily sold yesterday – regained 3.7p to 133.6p, fashion chain Next was 61p higher at 1981p, and Argos owner Home Retail Group cheered 16p to 372.5p.

But other blue-chips underwhelmed investors with corporate updates. Foods group Compass was the leading faller despite predicting results at the top end of expectations, sending the shares down 3%, or 9.5p, to 310.75p.

Pubs operator Mitchells & Butlers was another disappointment to investors, falling 8p to 610p.

Other stocks on the back foot included insurer Resolution, which slipped back 10.5p to 684.5p on reports that rival Pearl could launch an all-cash bid at a discount to the current price – potentially scuppering Resolution’s planned merger with Friends Provident.

A change of chief executive did little for Foster’s brewer Scottish & Newcastle, as traders speculated that chances of a bid for the firm had receded. Confirmation of Tony Froggatt’s departure sent the shares 10.5p lower to 615p.

The biggest Footsie risers were Alliance & Leicester up 62p at 795p, Taylor Wimpey ahead 17p at 275p, Northern Rock up 11.5p at 193.5p and Standard Life ahead 291.25p at 16.25p.

The biggest Footsie fallers were Compass off 9.5p at 310.75p, Vedanta Resources down 52p at 2057p, Tullow Oil off 11.5p at 585p and Kazakhmys down 25p at 1455p.