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Demand for bank shares lifts FTSE 100 to a 22-month high

THE FTSE 100 share index hit a 22-month high for the second day yesterday, as US data and earnings reports fanned hopes that a recovery in the world’s largest economy was gathering pace, with banks also buoyed by bullish broker comment.

The FTSE 100 closed 28.76 points higher at 5,825.01 – its highest close since 17 June 2008. The index rose 0.6 per cent on Wednesday.

Banks were the biggest gainers as investors bet that more good news would come out of the United States today when Bank of America reports its results, after JPMorgan Chase posted upbeat figures on Wednesday.

Royal Bank of Scotland, Lloyds Banking Group, Barclays, HSBC and Standard Chartered put on 0.9 to 2.6 per cent.

Banks also benefited from an Exane BNP Paribas note raising its sector stance to “neutral” from “underperform”.

“With pretty robust data coming thick and fast out of the US there is little in the way of short-term headwinds to hold back this market,” said Jimmy Yates, head of equities at CMC Markets.

The New York Federal Reserve’s “Empire State” general business conditions index, measuring expansion in New York state manufacturing, rose to a six-month high.

Though another report showed factory production activity in the American mid-Atlantic region expanded in April to its highest level since December 2009.

That data offset a rise in the number of US workers filing new claims for jobless aid last week as the backlog from the Easter holiday was processed.

Energy shares rose on the back of positive comment from Credit Suisse supporting the sector and underpinned by a firmer oil price.

BP shares added 1.5 percent, while BG Group, Tullow Oil and Cairn Energy gained 0.2 to 2 per cent.

Cruise-operator Carnival was a top FTSE 100 riser, up 2.1 per cent after Morgan Stanley raised its target price and repeated its “overweight” stance.

BT Group, up 2.2 per cent, benefited again from an upbeat Morgan Stanley note published on Wednesday.

But miners slipped back after recent gains and as investors remained concerned about a possible tightening of monetary policy in China hitting demand for metals, after it reported first-quarter GDP grew at 11.9 per cent.

BHP Billiton and Eurasian Natural Resources fell 0.9 and 1 per cent respectively, while Rio Tinto fell 0.2 per cent after a mixed update.

Meanwhile credit information firm Experian was the biggest FTSE 100 faller, down 2.9 per cent, after a trading update failed to inspire.

Weakness in selected defensive issues was also a feature among the blue-chip fallers. Imperial Tobacco fell 1.1 per cent as S&P Equity Research cut its rating to “hold” from “buy”.

Peer British American Tobacco shed 1.7 per cent.