Footsie cashes in on banking stocks as miners suffer major slump

The FTSE 100 closed 8.1 points, or 0.13 per cent, higher at 6,319.0 as it added to the dramatic 90-point rise the previous day.

Royal Bank of Scotland jumped 1.9 per cent, or 38p, hitting an all-time high of 2,074p after being tipped by several analysts for a strong year and after UBS picked it as the cheapest large bank anywhere.

Barclays, another key pick in the UBS note, also rose 1.9 per cent, or 14.5p, to 760.5p, while HSBC Holdings gained 1.5 per cent, or 14p, to 953p on news that the banking group had appointed Simon Robertson, a City of London adviser, to be its leading non-executive director.

However, the day's biggest riser was Northern Rock with gains of 30p to 1,222p.

However, shares in miners more than eroded gains made on Tuesday as copper prices tumbled to a nine-month low, while rising stocks fuelled worries about a surplus this year.

Robert Parkes, an equity strategist at HSBC Securities said: "We're pretty flat today, we're being held back by the mining and oil companies. They're the two big drags on the market."

All London-listed miners nosed down, led by a 6 per cent, or 152p, fall in Xstrata to 2,417p.

It was followed down by Vedanta Resources, which lost 72p to 1,158p, Antofagasta, off 28p to 488p, and Lonmin, which shed 122p to stand at 2,975p.

Eight of the top-nine fallers in the FTSE 100 index came from the mining sector. BHP Billiton fared better than its rivals but was still down 3 per cent, or 29p, to 933p. A falling gold price put further pressure on the sector.

Oil stocks also exerted downward pressure on the index as crude oil prices fell below $59 a barrel as mild weather in the US Northeast cut demand in the world's biggest heating oil market.

Royal Dutch Shell shed 1p to 1,818p and BP dipped 2.5p to 569.5p.

Drax Group was down more than 5 per cent, or 43p, to 761.5p after a warm start to the winter and on weak power prices.

Among gainers, insurer Prudential gained almost 2 per cent, or 13.5p, to 724.5p on perennial vague bid speculation.

And cruise company Carnival continued to steam ahead, with a rise of 66p to 2,681p - its highest level since May last year. Retailers were also in the spotlight as investors prepared for a series of trading updates in the next few days.

Fashion chain Next, which is due to post a trading statement today, showed a rise of 5p to 1,847p, while Currys-owner DSG International lifted a penny to 196.5p on Christmas trading optimism, traders said. Morrisons was ahead 2.25p at 262.25p.

Confidence was helped by a positive update from warehouse chain Majestic Wine, which kicked off the retail reporting season with a healthy return from the Christmas period.

Like-for-like sales improved 4.4 per cent on a year earlier, ensuring Majestic shares rose 1.5p to 360p.

Brewer Scottish & Newcastle dipped 3p to 567p on unconfirmed reports that it had increased its stake in China's Chongqing Brewery Company.

Elsewhere, bluetooth chip specialist CSR dropped nearly 3 per cent, or 66p, to 2,681p over alleged infringement of a series of patents surrounding the bluetooth wireless technology.

CSR said it would defend itself "vigorously" against the infringement claims.

DOW JONES:12,474.44 +11.29

EARLY optimism on Wall Street evaporated yesterday – the first trading day of 2007 – as minutes from the Federal Reserve’s most recent meeting renewed concerns about the economic slowdown. Fed officials agreed at their December meeting that inflation was their predominant concern.

In morning trading shares had surged to new highs as oil prices fell and a stronger-than-expected US manufacturing index of 51.4, up from 49.5, spurred hopes of growth ahead.

Home Depot rose 3.3 per cent after Robert Nardelli, the chairman and chief executive, resigned.

The Dow Jones closed up 11.29 points, or 0.09 per cent, at 12,474.44. The Standard & Poor’s 500 index was down 1.56 points, or 0.11 per cent, at 1,416.74. The Nasdaq Composite index was up 7.87 points, or 0.33 per cent, at 2,423.16.