Much-needed rally for FTSE

The FTSE 100 Index staged a much-needed rally today as European markets reversed some of their recent punishing declines.

Banks and miners drove a 2% recovery on London’s FTSE 100 Index – up 97.4 points to 5038.1 – while positive economic data in the US helped fuel the rally.

America’s Dow Jones Industrial Average gained more than 100 points soon after opening, boosted by news that new US homes sales increased to their highest level since May 2008 last month.

Investors were also buoyed by an upbeat report showing US demand for “big ticket” manufactured goods rose 2.9% in April.

Today’s gains looked to have been fuelled by bargain hunting after falls in the previous session took the Footsie to levels not seen since last September on the back of European debt worries and heightened military tensions in Korea.

The bounce back today was being led by a recovery for the mining and banking sectors caught in yesterday’s sell-off.

An upbeat note on the bank sector from broker Credit Suisse added to the positive sentiment, with the group declaring that “UK banks are investable and at current levels offer value”.

Part-nationalised Lloyds Banking Group lifted nearly 7% or 3.3p to 53.8p, followed by Barclays, ahead 13.2p to 297p, and taxpayer-backed Royal Bank of Scotland, up 2.4p to 45.1p. HSBC failed to benefit from the rally as shares dropped 1.7p to 617.8p.

Among miners, Kazakhmys led the way with a 77p hike to 1149p, while Lonmin added 100p to 1661p and Rio Tinto lifted 208.5p to 3064.5p.

Business telecoms firm Cable & Wireless Worldwide was another strong riser in London after delivering the first set of figures since its demerger, which met market expectations. The company said market conditions were improving and that its main operations had gained share, triggering a 5% or 3.6p rise to 79.45p.

Luxury fashion brand Burberry also impressed investors after a 23% rise in full-year profits to £215m (€253m) exceeded City forecasts, prompting shares to rise 46.5p to 659p. It also lifted its dividend payout by 17%

The biggest Footsie risers were Burberry up 46.5p to 659p, Rio Tinto ahead 208.5p to 3064.5p, Kazakhmys up 77p to 1149p and Petrofac 73.5p to 1075.5p.

The biggest fallers were National Grid down 60.3p to 495.7p, Next off 32p to 1983p, International Power down 4.5p to 284.5p and Standard Life off 1.65p to 173.75p.