Investors looking for bargains among battered stocks power the FTSE rally

Britain’s top share index notched up solid gains yesterday, led by banks and commodities, as investors sought out bargains among battered stocks, but analysts, eckoned the rally was unsustainable.

The FTSE 100 ended 161.75 points, or 3.1 per cent, higher at 5,318.59, building on Tuesday’s 1.1 per cent advance. It had shed nearly six per cent in the previous two sessions.

“I think that investors are very nervous,” Peter Dixon, economist at Commerzbank, said. “They’ll pick up bargains when they think there is a good opportunity (but) they probably won't want to hold them for too long and they’ll probably sell in any decent rally.”

Banks were among the top sector performers -- led by Lloyds Banking Group , up 6.4 per cent, while Barclays and Royal Bank of Scotland climbed 6.1 per cent.

Other perceived higher risk assets found favour, with integrated oil stocks and miners tracking strong advances in the crude and metals prices. BP added 4 per cent, helped by news its partner Chevron has made a discovery in the Gulf of Mexico.

The market’s risk-on mode hit gold miner Randgold Resources, the FTSE’s heaviest faller, down 2.3 per cent.