FTSE in positive territory

Blue-chip banks were on a firmer footing today as immediate fears over America’s plans for radical banking reforms began to ease.

But the sector remained firmly in the spotlight amid yet more speculation over the size of handouts in this year’s bonus season.

Barclays – said to be deferring bonuses to highest earners – and Royal Bank of Scotland both bounced back by 3%, with the wider FTSE 100 Index also climbing into positive territory – up 13.4 points at 5316.

Banks last week suffered hefty share falls after US President Barack Obama announced a “fight” with Wall Street, with proposals that could prevent US banks that take customers’ deposits from engaging in risky activities.

The sell-off dragged the Footsie to its lowest level for more than a month on Friday and also saw America’s Dow Jones Industrial Average slump into the red.

But stocks regained their poise, helped by US stock futures that pointed to a higher opening on Wall Street.

A rebound from banks added support in the UK as Barclays rose 2% or 6.5p to 277.85p and RBS added 0.89p to 35.57p, while Asian-facing group Standard Chartered gained 48.5p to 1476.5p.

The bank bonus rumours gathered pace, with Goldman Sachs reportedly capping pay and bonuses for its top UK bankers at £1m (€1.13m) and G7 representatives set to debate reforms in the sector at a meeting convened by City minister Lord Myners.

Insurers were also benefiting from the cheerier sentiment in the top tier, led by Legal & General with a 4% or 3.55p hike to 79.7p.

Outside the top flight, housebuilders were in favour after Morgan Stanley raised its target price on Persimmon and a survey from Rightmove said more than half of people expect house prices to continue increasing in the next 12 months.

Persimmon rose 8.8p to 461.8p, while Redrow added 0.9p to 129.8p and Barratt Developments cheered 2.9p to 130.1p.

Meanwhile, Hornby shares were on the right track with a 3p rise to 145p as the Airfix and Scalextric firm allayed recent fears over prospects by delivering a strong Christmas sales update.

Bournemouth-headquartered department store chain Beale suffered a 3% drop - down 1p at 29.5p – as it said the snow had hit sales in the first 11 weeks of its new financial year and offset an improved performance over Christmas.