Banks and commodities gain strength after S&P reassures on Greek debt

BRITAIN’S top shares gained 0.5 per cent yesterday lifted by strength in banks and commodity issues after reassuring news on Greece’s debt situation and as investors awaited the outcome of a US Federal Reserve meeting.

At the close, the FTSE 100 was 26.58 points higher at 5,620.43, having closed 0.6 per cent lower on Monday.

European finance ministers met yesterday and agreed a strategy to help out debt-stricken Greece if that country's own steps prove unable to ease its debt burden.

Standard & Poor’s, meanwhile, affirmed its credit ratings on Greece’s debt but ended its review for a downgrade, saying the Greek government’s recent deficit reduction measures are supportive of the ratings.

“Overall stock markets retain their positive bias and investors seem to have breathed a collective sigh of relief today now that there is a safety net in place for Greece,” said Tim Hughes at IG Index.

Banks were in demand, rebounding after falls on Monday helped by the Greek developments and awaiting the Fed meeting outcome, with investor’s setting aside any jitters ahead of the new U.S. banking regulation bill, also set to be unveiled on Tuesday.

Sector heavyweights HSBC and Standard Chartered added 0.4 to 1.1 per cent, respectively, while Barclays took on 2.5 per cent as Morgan Stanley raised its target price to 440p from 370p and forecast that its investment banking arm can deliver a £7bn profit in 2011.

Royal Bank of Scotland gained 1.3 per cent. The bank is preparing a debt buyback scheme as it seeks to rearrange its balance sheet to boost its core capital, the Financial Times reported yesterday. Oil majors were the top blue chip sector as crude prices rose above $81.50 a barrel helped by a weaker dollar.