LONDON FTSE 100 CLOSE 4,169.96 +47.10

Published on Wednesday 3 December 2008 20:32

EXPECTATIONS of a sizeable interest rate cut today by the Bank of England and a rally by defensive pharmaceutical stocks helped the FTSE to close up 1.1 per cent yesterday.

Shares in London closed up 47.10 points at 4,169.96, adding to the 1.4 per cent rise on Tuesday.

In volatile trading, the UK share index was boosted in late trade by a rise in US equities, with defensive pharmaceuticals and tobacco stocks faring best as data painted an increasingly bleak picture for the UK and global economies.

Among the heavyweight pharmaceutical stocks, GlaxoSmithKline gained 4.4 per cent or 49.5p to close at 1,170p while f AstraZeneca rose 5.4 per cent or 133p to reach 2,608p.

Neil Parker, a market strategist at Royal Bank of Scotland, said: "It's extremely volatile in all markets, with big swings in equities, fixed income and currency markets, but in equity markets I think we have touched a base to rally from."

Trading in banks was nervous ahead of today's interest rate decision by the Bank of England's monetary policy committee as the banking sector's woes continued to dominate.

HBOS and Lloyds TSB shares both surrendered some of the gains made on Tuesday, with HBOS closing down 3.8 per cent or 3.4p at 87.1p and Lloyds TSB ending the day at 163.7p, down 1.1p or 0.7 per cent.

Royal Bank of Scotland rose by 4.5 per cent or 2.9p to 66.9p after an index reweighting of its shares on Tuesday night.

Weakness in the share prices of major oil companies was the main drag on the Footsie as crude prices rallied slightly but stayed around the $47 a barrel level – more than $100 lower than this year's peak.

BP shed 0.5 per cent or 2.75p to close at 506p while Royal Dutch Shell fell by 0.8 per cent or 14p to 1,675p and BG Group lost 3.4 per cent or 28.5p to end at 799.5p.

BP yesterday said it had agreed to an asset swap with BG Group in the southern sector of the North Sea.

Shares in Rio Tinto fell by 9.6 per cent or 122p to 1,148p despite the miner denying market talk of plans for a rights issue.

Other miners were mixed: Xstrata was down 5 per cent or 36p to 690.5p, but Anglo-American gained 1.5 per cent or 20p to reach 1,317p, Kazakhmys rose 3.9 per cent or 8.25p to end at 220.75p, while Vedanta Resources gained 2.16 per cent or 11.46p to close at 543p, in spite of yesterday trading ex-dividend, after recent share buy-back moves.

BHP Billiton rose by 3.8 per cent or 39p to end at 1,075p as Citigroup resumed coverage on the stock with an upgrade to "buy" from "hold".

Other high-profile fallers included Marks & Spencer after it emerged the retail chain planned to hold another 20 per cent off sale this week.

M&S fell by 2.5p or 1.1 per cent to 222.25p, while rival fashion rival Next shed 21p or 2 per cent to 2,031p.