FTSE heads for weekend in fine form

The London market ended the week on a sound footing, shaking off earlier losses and a lacklustre start to trading in New York.

News of stronger-than-expected job figures in the US helped sentiment and lifted the FTSE 100 a modest 0.2 per cent to a fresh two-and-a-half-year high of 5,875.35.

The gains followed a major week for markets after the US Federal Reserve's fresh $600 billion (370bn) stimulus for the US economy triggered a wave of buying.

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The dollar pulled back from its lows after Thursday's sharp falls, and was just up on the pound at $1.62.

Yusuf Heusen, senior sales trader at IG Index, said: "A far bigger-than-expected increase in US non-farm payrolls delivered a shot in the arm for equity traders.

"There have been some jitters across the Atlantic as to whether this potentially inflationary news could offer any more upside for stocks. We've had a busy few days for earnings and this is set to continue into next week, with Sainsbury's, Marks & Spencer, Associated British Foods, Vodafone and Inmarsat among the higher-profile names reporting."

The end-of-week rise in London came despite uncertainty in the banking sector following updates from Royal Bank of Scotland and HSBC.

RBS shares initially started on the front foot after it said bad debt impairments continued to drop and it achieved underlying earnings of 726 million for the third quarter. Overall losses for the period were 1.4bn after its results continued to be skewed by volatility in accounting charges. But with the fourth-quarter market environment set to remain challenging, particularly in investment banking, RBS shares dropped 2.1p or 4.5 per cent to 45p.

Pressure on the sector also came from HSBC after it said its third-quarter profits grew more slowly than in the first half. Bad debts continued to fall but shares were 12.1p lower at 683p, a decline of more than 1 per cent.

Lloyds Banking Group also retreated, down 0.4p to 69.8p, despite impressing investors earlier this week with the appointment of Santander's UK boss as chief executive.

Joining RBS at the top of the fallers' board, Rolls-Royce lost a further 5 per cent after Qantas said the engine failure on an Airbus A380 was "probably" caused by a material failure or a design fault. Shares fell 30.5p to 591p after dropping about 5 per cent during the previous session.

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Military kit firm Cobham has also endured a difficult week after its warning that its technology divisions were unlikely to grow revenues in 2010 due to delays in winning US contracts. Shares remained under pressure yesterday with a decline of 3.2p to 204.8p.

In other corporate results, Carphone Warehouse shares jumped 10 per cent - up 32p to 340p - after strong sales of smartphones in the UK and US prompted it to raise its earnings guidance for the year. It also told investors that it planned to pay its first dividend as a slimmed down business.

Medical devices firm Smith & Nephew jumped 5 per cent, up 29p to 587.5p, on news that its third-quarter earnings figures were not as weak as some analysts had feared beforehand.