FTSE ignores bank woes to follow US

London's Footsie shrugged off concerns in the banking sector yesterday as a buoyant opening session on Wall Street helped blue chips make gains.

Lloyds Banking Group and Royal Bank of Scotland were among the heaviest fallers on the FTSE 100 Index after a speech at the weekend by the chairman of the Independent Banking Commission (ICB) sparked fears over plans to overhaul the industry.

But the wider index closed up 0.8 per cent or 47.6 points at 5,943.85, mirroring early session gains on US markets.

Yusuf Heusen, senior sales trader at IG Index, said: "It was shaping up to be a very quiet day for UK shares, but some momentum has come back into the market on the back of a strong US open."

The Dow Jones Industrial Average rose 0.8 per cent in early trading, boosted by technology stocks as Intel revealed plans to increase its dividend.

McDonald's released figures revealing a 2 per cent rise in fourth quarter net profit - in line with market expectations, but growth had slowed on the previous three months as markets were hit by poor weather.

The pound fell back against most major currencies as traders took profits off the table after last week's surge on interest rate hike speculation.

Sterling fell to €1.17, although it held firm at $1.60.

Lloyds suffered the biggest loss on the Footsie in a poor session for banks following a speech by ICB chairman Sir John Vickers.

He appeared to rule out a full-scale break-up of the banks, but mulled plans to ring-fence their retail operations from investment banking and said important institutions should be required to hold more core capital than in the current regime.

Lloyds closed more than 3 per cent or 2.3p lower at 65.1p, while RBS dropped 0.9p to 44.1p and Barclays fell 0.4p to 300.5p.

The latest political turmoil in Ireland, where the coalition government is on the brink of collapse, added to fears over the sector's Irish exposure and the eurozone debt woes in general.

The other main interest of the session came from the debut of International Consolidated Airlines Group following the merger of British Airways and Iberia. Shares fell 3.1p from their opening price to 285p, although this was more than 1 per cent higher than on Thursday, when BA called time on nearly 24 years of trading under its own name.

The stock received an early boost as broker UBS initiated coverage with a "buy" rating and a price target of 360p.

Outside the top flight, shares in bank note printer De La Rue plunged 15 per cent after French takeover suitor Oberthur abandoned plans to acquire the firm following the rejection of its latest approach worth 926 million.Shares closed 124.5p lower at 695p.

Attention was also focused on the food production sector after deals involving pizza and biscuits firm Northern Foods and Hovis maker Premier Foods.

Premier's shares were down 0.6p at 21.8p after selling its Quorn and Cauldron meat-free business to a private equity consortium for 205m.

But Northern Foods shares jumped 11p to 74p after it agreed a 342m takeover by the owner of Harry Ramsden's restaurants.