Northern Rocks hopes influence FTSE rally

Growing hopes of a rescue of beleaguered mortgage lender Northern Rock sparked a rally in the firm’s shares today.

The 10% surge followed reports that New York private equity firm JC Flowers had raised £15 billion towards a potential bailout from backers including JP Morgan and Credit Suisse.

Northern’s shares – which plunged to record lows this week – rose 13.2p to 148.8p. The wider FTSE 100 Index was 23.2 points higher at 6523.6 at mid-morning, as cautious traders awaited interest rate decisions in the UK and Europe tomorrow.

Other banking stocks making firm gains included Royal Bank of Scotland, which cheered 17p to 555.5p on reports that the firm may sell its hotel properties.

Halifax Bank of Scotland also lifted 20p to 970p after outlining plans to channel resources away from home loans and into more profitable areas such as corporate lending at a conference yesterday.

Other heavily-weighted stocks lending support to the benchmark index included HSBC, up 27p at 938.5p, and Barclays, which gained 14p to 635p.

The leading Footsie faller was B&Q owner Kingfisher, a strong gainer yesterday after an upgrade for the retail sector. The stock was down 4.8p to 191.3p, a fall of more than 2% as the company turned ex-dividend, meaning that shareholders are not entitled to the latest payout.

Argos owner Home Retail Group joined Kingfisher on the back foot, falling 8.5p to 399p.

Ground engineering firm Keller topped the FTSE 250 Index risers board as brokers upgraded the firm following a US acquisition, sending its shares more than 6% ahead, or 66p, to 1097p.

Ceramics and electronics group Cookson was another second tier gainer as investors cheered yesterday’s news of a £495 million takeover approach for filters and coatings specialist Foseco. Shares were up 32p at 826.5p.