The FTSE 100 Index rallied in the last few minutes of trade today after the Bank of England reduced borrowing costs to 1% – the lowest in its history.
A late surge from Wall Street mirrored the move into positive territory for the index after a day in the red and the FTSE closed up 0.3 points at 4228.9.
The Dow Jones Industrial Average crept back towards the 8,000 mark reversing early steep falls and shrugging off lacklustre quarterly results and more grim news from government reports on unemployment claims.
Banks and housebuilders saw some lift from the interest rate cut – which was in line with market expectations.
The pound also saw an unexpected gain after the European Central Bank (ECB) decided to leave eurozone rates at 2%.
Investors were also taken by surprise by news from Halifax of a 1.9% increase in property prices last month.
Major banks gained some ground on the rate cut despite Credit Suisse lowering its target prices on three UK players.
Of the trio, Lloyds Banking Group – which now includes mortgage giant Halifax - rose 5.4p to 100.6p, Royal Bank of Scotland added almost 6%, up 1.2p to 22p, and Barclays was 3.1p ahead at 100p. Meanwhile HSBC fell 5p at 539.5p.
Oil and gas firm BG Group topped the Footsie leaders board despite the easing price of crude. It gained 10%, or 97p to 1048p after record results and a prediction that natural gas demand would continue to grow despite the recession. BP was also up 1.75p at 501.5p, reversing earlier falls, but Royal Dutch Shell remained in negative territory, down 14p to 1644p.
Foods group Compass, which weighed in with a healthy trading update, added 14.25p to 357.25p. Drugs firm GlaxoSmithKline was meanwhile up 9p to 1277p after the company announced plans to find an extra £1 billion in cost savings.
Consumer goods giant Unilever was the leading top-flight casualty after fourth-quarter sales volumes came in below expectations and it declined to give an outlook update for 2009. The Knorr-to-Dove soap firm lost 87p to 1396p, a fall of 6%.
In the FTSE 250, housebuilders were making strong advances, following the publication of the Halifax house price index.
Barratt Developments saw a 4.75p rise to 78.25p and Bellway also rose 31p to 643.5p, despite an update revealing more price falls and a near-50% plunge in forward orders.
Back in the top tier, Balfour Beatty saw a 2% lift, up 10p at 374.25. But property group British Land saw its shares fall 5%, down 24.25 to 430.75p.
The biggest Footsie risers were BG Group up 97p at 1048, TUI Travel up 18p at 242.5, Royal Bank of Scotland up 1.2p at 22p and Lloyds Banking Group up 5.4p at 100.6p.
The biggest Footsie fallers were Unilever down 87p at 1396p, Legal & General down 3.4p at 59.7p, British Land off 24.25p at 430.75p and Land Securities Group down 35.5p at 645.5p.