FTSE up in morning trading

Fears of an end to the recent rally in banking shares were allayed today following further gains for Lloyds Banking Group and Barclays.

The sector’s three-day winning streak came to an end on Thursday, but those losses were reversed during a positive morning session on the London market.

The FTSE 100 Index stood 5.8 points higher at 4195.6 by mid-morning, despite a fall of more than 3% for the Dow Jones Industrial Average last night. The prospect of a positive start to trading on Wall Street lifted sentiment.

Royal Bank of Scotland set the pace among the banks after shares rose 1.1p to 22.1p, a gain of almost 6%. Lloyds was up 5.1p at 94.1p, while Barclays rose 4.7p to 105p.

The sector was in freefall last week but has recovered following reassuring comments from Barclays management and broker comments indicating that fears of further nationalisations in the sector may be overdone.

There was also a recovery for building supplies firm Wolseley, which has been under pressure amid fears it could be forced into a cash call to shareholders. Wolseley rose more than 7% or 12.2p to 183p after broker Collins Stewart raised its rating on the stock from sell to hold.

Xstrata has already announced a £4.1 billion rights issue in a bid to shore up its balance sheet. The mining giant, which is facing a sharp fall in commodity prices, saw its shares come under further pressure with a drop of 28p to 617.5p. Elsewhere in the sector, Antofagasta dropped 22.75p to 424p and BHP Billiton fell 59p to 1217p.

Outside the top flight, shares in camera retailer Jessops slid by a third after it braced investors for a “fundamental restructuring” of its debt. Shares were off 0.9p to 1.85p, as Jessops also said margin pressure offset a recent improvement in sales.