FTSE closes narrowly up after fight back from banks

A strong rebound in banking stocks saw the FTSE end higher on Friday after a turbulent week, with investors pinning hopes on more action from the European Central Bank to deal with the region's debt crisis.

As traders cited market talk of help from France with some form of capital injection to bolster French banks' balance sheets, BNP Paribas and Societe Generale jumped 9.8 per cent and 8.8 percent respectively on Friday.

British peers felt a knock-on effect, with Barclays, Lloyds Banking Group and Royal Bank of Scotland clustered towards the top of the blue-chip leader board, up 3.5-5.1 percent.

The FTSE 100 ended up 25.20 points, or 0.5 per cent, at 5,066.81, having dipped as low as 4,928.14.

The sector was sharply lower earlier on fears European banks would take more writedowns on Greek debt exposure.

A grim economic outlook from the U.S. Federal Reserve and downbeat manufacturing data in China have heightened fears the global economy could be heading back into recession, particularly hurting commodity stocks in the previous session.

Randgold Resources (RRS.L) and Fresnillo (FRES.L), down 4.7 percent and 4.3 percent respectively, were the biggest fallers in the sector as gold and silver fell sharply.

Traders blamed gold's fall on margin calls to cover losses in other assets such as equities and silver, and distress selling by investors who have grown increasingly uncomfortable with the turmoil on the credit market.

The FTSE ended the week down 5.6 percent, wiping 81 billion pounds off its value.

Looking at the technical view on December 2011 futures, Nicolas Suiffet, analyst at Trading Central, said the index's push above 5,055, which he said acted as a pivot, "validate(s) the bullish signal."

This, he said, paves the way to a recovery towards Fibonacci retracement levels at 5,110, 5,145 and then 5,200.

Among gainers, Tesco managed a 2.5 per cent rise, boosted as Evolution Securities upgraded its rating for the world's third biggest retailer to "neutral" from "sell" as a result of the firm's 500 million pounds price repositioning.

Evolution said the move by Tesco to cut prices on 3,000 retail lines, part-financed by reducing the cost of its customer loyalty programme, was in line with a strategy it advocated.

"The repositioning takes effect from Monday and we will take a close look in stores then, but in principal this appears to be the right strategic move by Tesco and should help the company get on the front foot," the broker said in a note.