Stocks rebounded out of the red today on hopes that the worst of the recession may be over on both sides of the Atlantic.
Comments from Bank of England Governor Mervyn King spurred on the Footsie, while the rally was also fuelled ahead of the latest result of the two-day meeting of the US Federal Reserve.
The FTSE 100 Index overturned a difficult start to close 45.4 points higher at 4716.8 after Mr King said the recession had struck harder than previously thought, but said the prospects for economic recovery were “somewhat stronger”.
In America, the Dow Jones Industrial Average rose 1.3% as US investors were also hoping for uplifting comments on prospects for the world’s largest economy when the Fed delivers its verdict on interest rates.
London’s Footsie turned around from a 30 point loss earlier in the day, despite further grim news from the labour market after the unemployment figure rose by another 220,000 to 2.43 million.
Banks benefited from the market’s turnaround with their first positive session since disappointment at figures from Royal Bank of Scotland last week.
RBS was one of the sector’s highest climbers – up 2.32p at 45.15p. Lloyds Banking Group jumped 5.84p to 96.83p, although HSBC was 1.9p lighter at 653p.
Lloyds made its first disposal since the acquisition of HBOS with the agreed sale of its Insight asset management arm, while concerns over the threat of a £15bn (€17.4bn) rights issue eased.
Friends Provident, which yesterday agreed a £1.86bn (€2.16bn) takeover, gained 3p to 76p. Elsewhere among the insurers Legal & General was ahead 2.3p at 65.25p.
But construction firm Balfour Beatty set a strong pace at the top of the FTSE 100 risers board, up more than 8% or 26.4p to 346p after half-year profits rose 14% and the group 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 7.3p to 244.8p, putting it among the Footsie’s leading fallers.
Rival Thomas Cook – due to post figures tomorrow – was also on the back foot, 6p down at 230p.
Pubs groups endured a poor session, with Greene King – off 15.8p at 436.6p the leading second tier faller. Sector counterparts Enterprise Inns and Marston’s shed 5.1p to 157p and 0.6p to 95p respectively.
The biggest Footsie risers were Balfour Beatty up 26.4p at 346p, Lloyds Banking Group ahead 5.84p at 96.83p, Royal Bank of Scotland up 2.32p at 45.15p and BG Group up 48.5p at 1033p.
The biggest Footsie fallers were Fresnillo down 21p at 556.5p, Icap off 13.6p at 431.8p, Eurasian Natural Resources down 23p at 763p and TUI Travel down 7.3p at 244.8p.