Eurozone bail-out hope lifts Footsie

The FTSE 100 Index pushed to a new two-and-a-half year high yesterday, buoyed by reports that the eurozone bail-out fund may be enlarged.

The Footsie rallied more than 1.1 per cent or 70.73 points to close at 6,056.43 as banking and mining stocks recovered from Monday's losses.

Yusuf Heusen, senior sales trader at IG Index, said: "Despite the odd wobble along the way this month stock markets still appear to be buoyant, with investors aggressively buying into any sell-offs.

"After the gains seen in December, there is definitely scope for a deeper correction than we have been used to of late, but at the moment momentum continues to favour the buyers."

The market was boosted by talk that finance ministers from some of the richest nations in Europe had agreed to pump extra money into the European Stability Fund, helping to reassure investors that the eurozone would be able to deal with another debt crisis. Successful bond auctions in Spain and Greece added to confidence about the eurozone.

Barclays, which is heavily exposed to the Iberian peninsula, moved slightly ahead by 1.2p to 307.8p, while HSBC added 5.8p at 709.3p. But Lloyds lost earlier gains, slipping 0.3p to 67.8p.

The euro strengthened on the back of the improved sentiment, and was up against the pound at €1.19.

But the pound was up against the dollar at $1.60 after official figures revealed that UK inflation surged to 3.7 per cent in December.

Fashion house Burberry topped the risers' board after it delivered another forecast-beating trading update.

The retailer surged more than 5 per cent, up 56p to 1,115p, after underlying revenues rose 27 per cent in the third quarter and it guided the market towards full-year profits at the top end of City expectations.

The rebounding price of many commodities helped miners recover from Monday's losses, which were sparked by uncertainty around China's plans for monetary tightening. Kazakhmys was up 49p at 1,665p and Eurasian Natural Resources was ahead 29p at 1,101p.

On a shortened fallers' board, GlaxoSmithKline fell after Monday's news that the cost of settling legal disputes over controversial diabetes drug Avandia will hit a record 2.2 billion and wipe out profits for the fourth quarter. Shares fell 23.5p to 1,181.5p, a drop of nearly 2 per cent.

Among other trading updates, FTSE 250 Index stock Taylor Wimpey rose 8 per cent after it confirmed takeover approaches for its US division and said it continued to trade in-line with expectations in the UK during the second half of 2010.Shares rose 2.9p to 38.1p.

Taylor Wimpey's update spurred on the housebuilding sector, with Bovis Homes up 17.2p at 458.4p and Persimmon up 24p at 459.7p.

Carphone Warehouse added 4.3p to 389.3p after it said slower growth in its European mobile phone arm was offset by its partnership with American electronics giant Best Buy.

Among the Scottish stocks, Dunfermline-based eye scanner maker Optos fell 6p to close at 190p, despite reporting a 10.3 per cent rise in first quarter revenue to 16 million.