FTSE soars in morning trading

Takeover speculation and hopes of a dividend hike from Royal Bank of Scotland caused shares in the financial sector to surge today.

With the Dow Jones Industrial Average also finishing strongly on Friday, the FTSE 100 Index spent some of the session above the 6000 barrier. By mid-morning, the Footsie was 108.7 points stronger at 5997.2.

Alliance & Leicester led the risers board with a gain of 9%, after a newspaper said Lloyds TSB had begun looking at potential targets in the banking sector.

As well as A&L, up 45.5p at 555.5p, FTSE 250 company Bradford & Bingley was seen as another possible target, causing its shares to jump 16.5p to 205p.

RBS rose 27.25p to 405.25p, a gain of 7%, after speculation of a 5% dividend increase later this week fuelled hopes that UK high street banks have weathered the credit crunch better than rivals in the United States and Europe.

Halifax Bank of Scotland was one of the beneficiaries of the improved sentiment, up 26p to 672p ahead of results on Wednesday.

Property group Hammerson topped the Footsie risers board for a while after full-year results came in ahead of expectations. Shares were 62p higher at 1122p, a rise of more than 6%.

In the FTSE 250 Index, Biffa shares fell 6% – or 22.25p to 345.75p – after the waste disposal group said third parties – thought to be Suez and private equity firm Terra Firma – were no longer interested in making an offer for the firm. Shareholders are now left with a 350p a share offer from Montagu Funds.

Premier Foods suffered another turbulent session after a downgrade from Credit Suisse caused shares in the Branston Pickle firm to fall 9% or 9.75p to 96.25p.

Transport group Stagecoach rose 8.5p to 233p following a strong trading update.