Bearish Bernanke helps lift the FTSE

LEADING London shares shook off Asia's overnight losses, triggered by bearish comments from US Federal Reserve boss Ben Bernanke.

At the close of play yesterday, the benchmark FTSE 100 index had gained 1.9 per cent as banks made useful gains ahead of European stress test results, due today, and miners and oils gathered pace after US stocks rallied.

The Footsie closed at 5,313.81, up 99.17 points and the first time is has ended above 5,300 since 18 May - the day before Germany introduced a short-selling ban at the height of the eurozone sovereign debt crisis.

The gain took a two-day rally by the UK index to 3.3 per cent after it snapped a five-session losing streak on Wednesday.

CMC Markets analyst Michael Hewson said: "Risk appetite made a sharp return as equity markets shrugged off the 'unusual uncertainty' of Bernanke's comment.

"They have rallied on a number of factors, focusing on company earnings, and better than expected economic data out of Europe, and the UK."

A surprise pick up in Eurozone manufacturing and service sector activity in July for the UK's biggest trading partner helped buoy investor confidence.

Wall Street's Dow Jones Industrial Average also enjoyed gains of almost 2 per cent early on as investors shrugged off falling house sales and rising jobless claims to toast another round of strong earnings from the likes of US firms Caterpillar and AT&T.

This helped the index claw back losses suffered in the wake of Wednesday's downbeat testimony from Fed chairman Bernanke.

Among the banks, Barclays advanced 13.4p to 303.65p, Lloyds Banking Group was up 2.6p to 63.6p, and Standard Chartered was 73p better at 1,842p.

The second-quarter earnings from Morgan Stanley and Wells Fargo came as welcome relief for the UK sector, which has been under pressure after figures from a raft of US investment banks including Bank of America revealed sharply lower trading revenues.

Sentiment was also good in advance of details on the European stress tests as some investors bet the results would not be as bad as the market previously feared.

Outsourcing group Capita was also among the winners after it reported a 15 per cent rise in half-year profits and said it expected to benefit from UK government spending cuts as public sector clients are forced to offload work to the private sector. Shares jumped 27p to 737p, a rise of 4 per cent.

Miners were in demand as base metal prices hit their highest level since the end of May. Kazakhmys was the leading riser in the sector, adding 57p or 5 per cent to 1,163p.

On the fallers board, shares in software firm Autonomy were 9 per cent lower after its first-half figures failed to please the market. Analysts said the company's margins were short of hopes, causing shares to plunge 164p to 1,649p.

DIY chain Kingfisher managed to overcome early losses seen after a deterioration in the sales trend at its B&Q business in the UK.

It blamed the downturn on the reduced appetite of shoppers for "big ticket" items, shares closing 1.8p higher at 225.3p.