Another rollercoaster session on the FTSE

Strong gains for heavyweights British Airways, Tesco and Royal Bank of Scotland capped another rollercoaster session for investors today.

Prospects for the London market had looked bleak at the start of the session after the FTSE 100 Index followed Monday’s 5% slump with further losses.

But an improved performance in New York boosted sentiment and meant the Footsie finished 1% higher – up 57.4 points at 4122.9.

The revival was driven by financial stocks after beleaguered Royal Bank of Scotland recovered 16% or 9.2p to 64p, Lloyds TSB rallied 8.4p to 164.8p and merger partner HBOS added 3.5p to 90.5p.

Meanwhile, British Airways shares were 12% or 17.4p higher at 157.1p after the airline confirmed merger talks with Australian rival Qantas.

BA said the proposed tie-up did not threaten ongoing merger discussions with Spain’s Iberia.

Tesco split RBS and BA at the top of the risers board after it impressed investors with a resilient third quarter trading update. While UK like-for-like sales growth of 2% was the weakest since the 1990s, the overall performance was better than some forecasts. With Tesco appearing to fend off its discount rivals, shares closed 13% higher, or 37.4p at 325.4p.

Commodity stocks suffered a further sell-off as fears of a deep global recession continued to linger in the sector after heavy losses on Monday. Rio Tinto led the fallers board with a drop of 11% or 155p to 1270, while Xstrata slid 87.5p to 726.5p and BHP Billiton lost 46p to 1036p.

The biggest Footsie risers were Royal Bank of Scotland up 9.2p at 64p, Tesco ahead 37.4p at 325.4p, British Airways up 17.4p at 157.1p and Admiral ahead 88.5p at 1032p.

The biggest fallers were Rio Tinto down 155p at 1270p, Xstrata off 87.5p at 726.5p, Fresnillo down 10p at 130.2p and Old Mutual off 3.5p at 51p.