FTSE gains ground

Hopes from the Bank of England that the UK economy may be over the worst of its slump helped the FTSE 100 Index gain ground today.

The Footsie retreated more than 30 points early on but took heart from Governor Mervyn King’s remarks to climb 21.8 points to 4693.1 by mid-morning.

Mr King said the recession had struck harder than previously thought but said the prospects for economic recovery were “somewhat stronger”.

The market rally came despite further grim news from the labour market after the unemployment figure rose by another 220,000 to 2.435 million. Analysts said there was some encouragement from the fact that the measure for claimant count was marginally better than expected.

Banks benefited from the market’s turnaround with their first positive session since disappointment at figures from Royal Bank of Scotland last week.

Lloyds Banking Group set the pace as investors finally shed their concerns about the Government’s asset protection scheme and the possibility that Lloyds may look to raise £15bn (€17.4bn) of cash from shareholders.

Lloyds jumped 4.84p to 95.83p, while RBS was ahead 2.2p at 45.03p, a gain of 5%. And the recent consolidation in the insurance sector meant leading players gained ground, with Legal & General ahead 2.05p at 65p.

Construction firm Balfour Beatty set a blistering pace at the top of the Footsie risers board, up 7% or 21.5p to 341.1p after half-year profits rose 14% and it forecast further good progress in the second half.

First Choice and Thomson owner TUI Travel fared less well, as strong summer trading and better than expected results for the third quarter were offset by fears over poor demand for winter holidays. Shares dropped 8.9p to 243.2p.

Rival Thomas Cook, which is due to post figures tomorrow, fell 7.2p to 228.8p.