Stocks rally after downbeat news from UK and US

The FTSE 100 Index marched further towards the 6000 mark as stocks shook off disappointing economic news in the UK and US.

London’s top tier added 26.3 points to 5978.1 despite official figures revealing the UK economy had not grown as strongly as thought in 2010, with GDP growth downgraded for the last three quarters.

America’s GDP rate was revised upwards for the third quarter from 2.5% to 2.6% - but by less than expected.

The Dow Jones Industrial Average clung to its opening mark after reaching its highest point in more than two years overnight.

In London, banking and mining stocks continued to push up the Footsie amid thin trading volumes.

Investors piled into BSkyB after business secretary Vince Cable lost his power to block a takeover approach by Rupert Murdoch’s News Corp.

BSkyB shares rose 2%, up 14.5p to 743p as Investec Securities said the probability of News Corp being given the green light to acquire the remaining 61% of BSkyB it does not already own had risen to 90% from 66%.

The final decision rests with culture secretary Jeremy Hunt, who is due to receive a report on the matter from regulator Ofcom at the end of the month.

Banks continued an improved run, as reports suggested China was prepared to buy debt from ailing Portugal. The western European country is tipped by analysts to follow in the footsteps of Ireland and Greece and seek an EU-funded bailout.

Lloyds was up 0.7p at 69.1p, Royal Bank of Scotland added 0.8p to 41p, and HSBC gained 4.6p to 667.4p. But Barclays, which is closely tied to the Iberian peninsula, slipped 0.8p to 267.6p.

British Airways pulled back from losses earlier this week, lifting 2%, as the Christmas travel outlook improved.

Heavy snow and icy temperatures shut the second runway at Heathrow airport and led to thousands of passengers being stranded. But as the weather forecast improved today, travel operators started to tackle lengthy backlogs and passengers were back on the move. BA shares added 4.9p to 273.3p.

Outside the top flight, Northern Foods jumped 7% as it confirmed interest from food tycoon Ranjit Boparan in making an offer for the Fox’s biscuits owner and gatecrashing an existing deal with Ireland’s Greencore.

Mr Boparan – one of Tesco’s biggest chicken suppliers and owner of the Harry Ramsden’s and FishWorks chains – is now going through Northern’s books after asking for access in a letter last Friday. Shares were up 4p to 64.5p.

In other takeover developments, outsourcing firm Mouchel rose 31% after Costain said it had made an all-share approach valuing the embattled company at around (€139m).

The bid was rejected by Mouchel, which said this month it had received buy-out interest from a number of parties. Shares were up 22.5p to 95.5p.