FTSE rallies to a close

The London market closed above the 6000 mark for only the second time in two months today as banking stocks rose amid talk of an official bid to free up the credit crunch.

Reports of Bank of England plans to swap mortgage-backed bonds on lenders’ balance sheets for less risky Government bonds boosted the sector by more than 3%.

With mining stocks also buoyed by bid speculation and some big gains on Wall Street, the FTSE 100 Index ended the day 139.3 points up at 6046.2 – a gain of more than 2%.

A 50% drop in first quarter profits for banking giant JP Morgan in America failed to halt the rally among financials as the results were better than feared, with Coca-Cola and Intel adding to the positive mood.

In London the rumoured asset swap scheme helped majors Royal Bank of Scotland and Barclays gain 7%, up 26.5p to 375p and 30p to 479p respectively.

Alliance & Leicester – seen as one of the banks most vulnerable to the crunch - was also up 7%, or 31.5p to 503p, with Halifax Bank of Scotland ahead 25p at 539.5p.

The leading Footsie riser was credit checking group Experian, which rose more than 11%, or 39.25p, to 395.25p after beating City expectations with second half sales figures.

Retailers also put in a strong performance despite wider worries over the health of the sector. Supermarket Morrisons was up 11.25p at 295p, while fashion retailer Next jumped 67p up to 1148p.

Talk of an improved bid from mining giant BHP Billiton for rival Rio Tinto helped both companies shares rise, up 95p to 1865p and 360p to 6367p respectively.

The chatter also saw Lonmin gain ground, adding 169p to 3274p, with Kazakhmys putting on 87 to end the day at 1761.

Another day of record oil prices which breached the 114 dollars a barrel mark helped prospector Cairn Energy add 144p to 3185p.

Elsewhere Legal & General led the fallers’ board after Britain’s third largest insurer warned of a tougher outlook for 2008 as a cooling housing market affects its protection business. This sent the group’s shares nearly 5% lower, or 6.4p, to 124.5p.

Other companies on the back foot included rival Friends Provident, as investors continued to desert the stock on fading hopes of an offer from private equity suitor JC Flowers. Friends was off 1.6p to 117.3p.

Elsewhere sportswear retailer JJB Sports shares recovered from earlier falls or more than 3% after the struggling firm said it planned to shut 72 stores and axe 800 jobs. Bottom-line profits including the closure costs fell 72% to £10.8 million, but shares later stood 3.5p higher at 117.25p.

The Footsie’s four biggest risers were Experian which gained 39.25p to 395.25p, Royal Bank of Scotland up 26.5p to 375p, Barclays up 30p to 479p and Alliance & Leicester which ended the day 31.5p better off at 503p.

The Footsie’s four biggest fallers were Legal & General, which lost 6.4p to 124.5p, BAE Systems down 11.25p to 466.75p, Smith & Nephew down 13p at 656p, and Friends Provident which eased 1.6p to 117.3p.