BANKS made it to the top of the leader board last night as the London market finished the week with a flourish on hopes for an early cut in interest rates.
A strong start to trading across the Atlantic added to earlier gains as the benchmark FTSE
100 index closed 135.4 points higher at 5,505.6, a rise of 2.5 per cent.
The Footsie gained 0.6 per cent for the week but is still down 15 per cent for the year.
The main interest of the session – ahead of a bank holiday weekend with the London market closed on Monday – involved official GDP figures, which were revised to show no growth between April and June.
It marked the worst performance for 16 years, but the City looked on the bright side of the second-quarter figure as it increased the chances that the Bank of England will lower borrowing costs from their current level of 5 per cent.
Such a prospect lifted financial, housebuilding and property shares at a time of weaker consumer confidence.
Banks were aided by news that state-run Korea Development Bank had named Lehman Brothers as one of its options for acquisitions, as well as generally improved sentiment after Federal Reserve chairman Ben Bernanke said the recent decline in commodity prices and the stabilisation of the dollar were encouraging.
Peter Dixon, UK economist at Commerzbank, said: "Remarkably given the bad news that's out there, the index is up as the (Lehman] takeover story has driven bank stocks higher which has pushed up the index.
"But you have to ask is it sustainable? I don't think so."
HBOS was one of the biggest risers, up 6 per cent, or 17p, to 289p. Royal Bank of Scotland added 11.25p, or 5.4 per cent, to 220.75p, while Lloyds TSB cheered 19.5p to 299.5p, a gain of 7 per cent.
The same interest rates hope buoyed housebuilders after strong gains on Thursday in the wake of reassuring comments from Charles Church owner Persimmon.
Taylor Wimpey, which is due to report results next week, gained 3.25p to 45.5p, alongside a further rise for Persimmon of 33p to 360p.
Property firms joined in the rally, with Hammerson up 45p at 918p and Liberty International top of the risers' board after a gain of 70p to 945p. Analysts said Liberty's improvement came after a major investor increased its stake.
A shortened fallers' board was frequented by commodity firms after the price of oil steadied following a gain of $5 the day before.
Aside from the economic update, there was little in the way of major corporate news.
In the second tier, Rentokil Initial shares slid 6 per cent after the company slashed its dividend by nearly 70 per cent and warned it faced a lengthy battle to revive its fortunes. With four profit warnings already under its belt, the latest update did little for confidence and caused shares to fall 4.5p to 69.25p.
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