Banks and oil fuel FTSE's 2.2 pct jump

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Banks and oil fuel FTSE's 2.2 pct jump

17/07/2008 15:13

By Atul Prakash

LONDON (Reuters) - The blue-chip index rose 2.2 percent at midday on Thursday, as banking shares spiked after results from JPMorgan eased worries about a credit crisis, and weaker crude prices lowered inflation concerns.

By 12:17 p.m., the commodity-heavy FTSE 100 <.FTSE> was up 113.9 points at 5,264.5, after closing down 0.4 percent on Wednesday, when it hit a three-year low.

Banks were in demand, with the sector topping the benchmark index, after unexpectedly strong results from Wells Fargo lifted the U.S. stock market over 2 percent on Wednesday -- the best day for banks in 16 years.

Better-than-expected results from JP Morgan on Thursday also helped the market, which now awaits quarterly results from Merrill Lynch , IBM , Microsoft and Google for more insight on the global financial crisis.

"We still have got big figures to come," said Keith Bowman, equity analyst at Hargreaves Lansdown, adding the market was waiting to see how other big banks perform.

"There is room for further writedowns and that would keep some investors on the sidelines for the time being. The market is likely to remain volatile," he added.

Analysts said the results might set the direction for stocks, which have fallen sharply in the past sessions on negative sentiment and poor outlook. The FTSE 100 index has fallen 18.6 percent so far this year, against an average annual gain of more than 10 percent in the previous five years.

Royal Bank of Scotland led the banks higher, with a jump of nearly 10 percent, while Barclays , HBOS , HSBC , Lloyds TSB and Standard Chartered rose between 5 and 9.4 percent.

BRADFORD & BINGLEY GAINS

Mid-cap mortgage bank Bradford & Bingley rose 4 percent after it won shareholder backing for a 400 million pound rights issue rescue.

"It’s a relief rally for banks," said Peter Dixon, UK economist at Commerzbank.

"But I think investors will be cautious under these kind of circumstances as all the factors, which were in place a week or two ago, are still there," he said, adding the markets have been sliding almost since May and these rallies might be temporary.

Oil and energy shares tracked the broader market recovery, ignoring sharp declines in crude prices in the past sessions.

BP advanced 2.3 percent, Royal Dutch Shell gained 0.7 percent and gas producer BG Group added 0.3 percent. But Cairn Energy lost 1.7 percent.

Miners broadly gained. BHP Billiton , Anglo American , Vedanta Resources and Lonmin were up between 0.6 and 1.2 percent.

Shares in pharmaceuticals fell, with Shire down 2 percent and AstraZeneca losing 1 percent.

Drax slipped 5 percent, topping the losers’ list on the FTSE 100, after Cazenove issued a downbeat note on the owner of the country’s biggest coal-fired station.

(Editing by Sue Thomas)

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