Banks and builders give FTSE a boost

A STRONG show from banking stocks yesterday offset disappointing trading updates and led the London market higher.

The FTSE 100 index rose 13.43 points or 0.2 per cent to 5,807.96 as positive American employment data bolstered earlier gains in the session and raised hopes for the global economic recovery. The US labour department revealed that benefit claims dropped last week to 421,000, the second-lowest level this year.

The Bank of England's widely expected decision to leave interest rates unchanged at 0.5 per cent and quantitative easing at 200 billion had little impact on the stock market.

The move prompted a drop in the pound against the euro, to €1.19, and the dollar, to $1.57.

Some traders speculated that a tightening of monetary policy in China could be imminent.

Michael Hewson, market analyst at CMC Markets, said: "Risk appetite has been tempered somewhat ahead of the release of some important Chinese (trade] data. This has led to some caution that the Chinese may act on monetary policy ahead of the weekend."

Barclays moved up 11.9p to 276p, while part-nationalised banks Royal Bank of Scotland and Lloyds gained 1.3p to 42.3p and 0.6p to 68.3p respectively. Standard Chartered bucked the trend and slipped more than 4 per cent as the bank confirmed its net interest margin had eased and that cost growth was likely to outpace revenue increases.

Its shares were down 68p to 1,810p despite Standard reassuring investors it was on track to achieve record results in 2010.

Investors were also focused on the latest house price data from Halifax.

The lending giant said property prices fell 0.1 per cent during November, but added there were signs the housing market was stabilising - providing a boost to housebuilding stocks.

Bellway rose 7 per cent or 46p to 662p, Persimmon lifted 17.1p to 427.4 and Barratt Developments rose 2.3p to 89p in the FTSE 250. The sector had already been buoyed by good news this week from Bellway, which said buyer confidence was returning after the government's spending review.

Equipment hire group Ashtead was top of the FTSE 250 risers after it increased its full-year profit forecast on the back of higher US profits.

The firm's shares rose 10 per cent, up 14.3p to 158p, after it said full-year results would beat its own expectations following a 41 per cent hike in interim profits.

Elsewhere, games and music retailer HMV slumped 17 per cent or 7.3p to 36.5p after reporting widening half-year losses and slashing its dividend.It also said trading had been hit by the snow at the start of its all-important Christmas trading period.

Imperial Leather maker PZ Cussons was also on the slide - down 7.5p to 385.5p - after an update revealed its profits were only marginally up year-on-year and revenues were broadly flat.

Moss Bros was enjoying better fortunes as its shares rose 4 per cent thanks to an 8.3 per cent rise in recent like-for-like sales. The menswear retailer saw shares lift 1p to 25p.

Among the Scottish stocks, shares in Fife-based I-design, whose software allows banks to show adverts on their cash machines, were unchanged at 25.5p despite reduced pre-tax losses.