Banks boost FTSE after Euro bailout

BRITAIN’S leading share index scored its biggest one-day per cent rise in nearly 18 months yesterday as the $1 trillion (£645bn) Eurozone rescue package doused concerns of EU debt defaults and further economic dislocation.

Bank stocks, which plunged last week on their exposure to debts of Greece and other EU states, led the advance as the FTSE 100 index leapt 264.40 points or 5.2 per cent to 5,387.42, its biggest one-day per centage advance since December 2008.

That late 2008 advance was after a big US economic stimulus package from then President-elect Barack Obama, coupled with prospects for a $15bn plan to bail out automakers.

The FTSE 100 index had dropped 7.7 per cent last week.

Banks were the biggest blue chip gainers, with Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered jumping between 6.8 and 16.2 per cent.

The rescue deal, hammered out by European Union finance ministers, central bankers and the International Monetary Fund in talks at the weekend, was the largest package in over two years since G20 leaders threw money at the global economy following the collapse of Lehman Brothers.

The Bank of England kept UK interest rates at 0.5 per cent on and made no change to its asset purchase target following its latest Monetary Policy Committee meeting, which had been delayed due to the British election.

Insurers saw good demand as equity markets advanced. Aviva, due to issue a trading update today, rose 10.4 per cent, with Legal & General, Old Mutual and Standard Life adding 7.6 to 11.7 per cent.

Prudential gained two per cent. The insurer has made progress in make-or-break talks with regulators over its rights issue-funded purchase of AIG’s Asian arm and is close to announcing a deal, according to sources.

Mining stocks were also in favour as the rescue plan lifted sentiment across markets and base metals prices firmed, with Kazakhmys, Eurasian Natural Resources, Xstrata and BHP Billiton up 6.3 to 10.7 per cent.

Vedanta Resources climbed 10.2 per cent after the India-focused mining group bought Anglo American’s zinc assets for $1.34bn to boost its exposure to the metal.

Anglo American’s shares added 10 per cent.

Lonmin added 5.8 per cent. The world’s third biggest platinum producer swung to a first-half profit after metal prices rebounded and costs fell, overshadowing a plan to issue shares to help fund a business in South Africa.

Randgold Resources, however, missed out on the sector advance, shedding one per cent reflecting a weaker gold price.

BP was the only other FTSE 100 faller, losing 0.9 per cent after saying the oil spill in the Gulf of Mexico has cost it $350m so far, suggesting a run-rate of cash far higher than some analysts had predicted.