FTSE up almost 40 points

The run of good news for British banking stocks continued today after the sector appeared to win a favourable settlement on bank capital standards.

Barclays jumped 8% and Lloyds and Royal Bank of Scotland rose 6% and 4% by noon respectively after Basel 3 regulatory proposals were watered down last night, reducing the pressure to raise significant amounts of new capital.

The bank gains helped the FTSE 100 Index to lift 39.6 points to 4390.6 as BP shares also climbed 2p to 418.95p on a significant day for the oil giant after it plunged into the red for the first time in 18 years.

As well as massive provisions to cover the Gulf of Mexico oil spill, investors also had to digest the resignation of chief executive Tony Hayward and details of the company's plans to sell $30bn (€23.1bn) in assets as it looks to concentrate on higher growth exploration and production.

Fresh from its clean bill of health after last week's European stress tests, the UK banking sector was also boosted by better-than-expected second quarter results from European counterpart UBS.

Barclays jumped 22.25p to 337.9p, while Lloyds Banking Group lifted 3.9p to 69.9p and Royal Bank of Scotland surged 2.2p to 48.9p.

There was also a rise of 21p to 548.5p for insurer Prudential and a gain of 9.2p to 364.3p for rival Aviva.

The biggest fall in the top flight came from InterContinental Hotels after the billionaire Barclay brothers reportedly offloaded their 10% stake in the company.

The stock fell 8% or 94p to 1105p after the placing by Barclays Capital on behalf of the brothers, who own the Ritz hotel and the Daily Telegraph.

Outside the top flight, Halfords shares fell 2% after it reported a 2.1% drop in first quarter like-for-like sales, in part due to one-off factors such as the World Cup and political uncertainty.

The figure was higher than the 1.5% decline expected in the City and meant the stock fell 12.5p to 504p.

There was also a drop of 4% for Imperial Leather soap firm PZ Cussons, even though it posted a 15% rise in full-year profits to £101.8m (€121.4m).

Shares were under pressure - off 13.8p at 346.2p - due to the company's cautious comments about trading prospects.

Meanwhile social housing firm Connaught, which slumped 69% yesterday on funding worries, rose 11% or 3.25p to 34.7p.