HBOS takeover sparks FTSE bounce back

Lloyds TSB’s £12.2bn (€15.3bn) rescue of HBOS sparked a shares bounce back on the FTSE 100 Index today after three straight days of losses.

The Footsie rose 1.7% by mid-morning, clawing back from three-year lows seen in the wake of the Lehman Brothers’ bankruptcy.

HBOS led the advances, with the deal ending uncertainty over its future and helping the wider Footsie rise 81.5 points to 4993.9.

A co-ordinated effort by central banks globally – including the Bank of England - to pump US$180bn (€124bn) into the financial system also helped restore battered confidence.

European indices followed the Footsie’s lead, with the CAC 40 in France and Germany’s Dax also up by 1%.

The rises come after a tumultuous past three days that has seen London’s blue chip share index shed more than 500 points.

HBOS rose more than 44% today – ahead 64.9 points at 212p – after the Lloyds’ takeover plan was unveiled, valuing HBOS shares at around 232p.

However, Lloyds also rose by 3.25p to 283p, reversing earlier falls of 8% after the bank’s investors initially gave the deal a cautious welcome.

Barclays was also higher for a second session, benefiting from the wider rebound and its plans to buy some Lehman Brothers assets, including its North American investment banking business.

Shares in the group rose 17p to 334.75p – a gain of 5%.

Unexpectedly strong retail sales figures showing a 1.2% rise last month helped boost major players such as Marks & Spencer and Next, ahead by 6%, or 10.75p to 237.5p and 57p to 1129p respectively.

B&Q owner Kingfisher also offered some welcome cheer as it reported a far higher than forecast 23% rise in underlying interim pre-tax profits. Shares rose 9%, or 10.2p to 130p.

Miners leant support to the top tier, as did higher oil prices.

Vedanta Resources climbed 94p higher to 1479p, while energy firms Drax and BG Group gained 38.5p to 764p and 46p to 1074p.