RBS pushes FTSE into positive territory

The London market surged through the 6500 barrier today as a better-than-expected trading update from Royal Bank of Scotland and hopes of an interest rate cut drove blue chips higher.

The FTSE 100 Index rose 68.9 points to 6562.7 ahead of the latest interest rate decision from the Bank of England.

RBS also sparked a rally among banking stocks with news of lower-than-feared losses from the US sub-prime mortgage crisis.

The NatWest parent saw shares shoot up 35.25p to 501p after it said write-downs for both RBS and recent acquisition ABN Amro would total £1.5 billion, £250 million of which it had been able to offset elsewhere.

The news helped lift shares across the sector, with Halifax Bank of Scotland ahead 32p at 831.5p, Barclays up 19p at 573p and even troubled mortgage bank Northern Rock up 3.1p at 103.1p.

Housebuilders built further on yesterday’s gains, with hopes mounting of a surprise cut in the cost of borrowing.

Taylor Wimpey rose another 5%, up 10p at 213.25p, with Barratt Developments adding 5.25p to 473p and Persimmon ahead 13p at 809p.

Second tier rival Bellway also saw shares rise, up 2%, or 18p to 918.5p, despite reporting reservations down 7% year-on-year as the credit crunch knocked homebuyer confidence.

Oil stock Royal Dutch Shell was under pressure, however, as US crude futures markets saw oil trade firmly below the 87 US dollars a barrel mark, easing back from gains on Opec’s news yesterday that it will not up production. Shell shares fell 11p to 1993p.

Elsewhere, fashion retailer Alexon – owner of Bay Trading and Dash – added to the gloom among high street stores with news that full year profits were unlikely to match market expectations.

Shares in the group dived 13%, or 14.25p to 93p.