HBOS sets trend as FTSE reverses a week-long decline

LONDON FTSE 100 CLOSE 5853.5 +85.8

HALIFAX Bank of Scotland bounced back from multi-year lows yesterday to rise 5.7 per cent.

ABN Amro analysts upgraded the shares, arguing the recent falls had pushed the Edinburgh– based bank to a reasonable value.

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Shares which plummeted after last week's annual results, rose 31p to 574.5p.

Takeover rumours and a strong start on Wall Street saw the FTSE100 break a week-long downward trend, closing 85.8 points higher at 5,853.5.

Yesterday's rise could have been much stronger but a raft of the UK's largest companies went ex-dividend, meaning shareholders will not be entitled to the latest dividend payments.

Shopping centre group Liberty International was the strongest performer on widespread rumours it has been engaged in takeover talks, pushing shares up 9.5 per cent to 1,033p.

While the company had no comment, names mentioned as bidders are Australian shopping centre owner Westfield and Singapore's sovereign wealth fund GIC.

Real estate company Hammerson rose 5.4 per cent at 1,131p on hopes the sector would be targeted, while British Land rose 52p to 988p.

Prudential was also ahead on rumour, after China's Ping An, which is said to be stalking the British insurer, said its plan to raise $17 billion had been approved by investors. The Pru gained 6.8 per cent to 643.5p on renewed hopes of a bid. Standard Life also climbed, closing up 4.1 per cent at 216.25p.

British Airways climbed 14.5p, or 5.8 per cent, to 265p after analysts at Deutsche Bank maintained a "buy" rating for the airline, saying the shares were cheap despite recent high oil prices.

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However, much of the strong sentiment yesterday was wiped off by companies going ex-dividend.

This group was led down by the banks, with Edinburgh-based Royal Bank of Scotland, which dropped 3.3 per cent to 355p, while banking rival Lloyds TSB, dropped 2.7 per cent to 428p, and Barclays dipped 9.25p to 447.5p

Also ex-dividend, Scotland-based British Energy eased back 1.9 per cent to 547p, while British American Tobacco lost 3 per cent at 1,848p.

ITV, Britain's largest commercial broadcaster rose 1.4 per cent to 67.4p despite pre-tax profits dropping by around a third.

In the midcap FTSE250 index online gambling group PartyGaming dropped 9 per cent to 25p despite underlying profits doubling. Analysts pointed to a slowing in revenue growth, while the company also announced chief executive Mitch Garber is leaving the company.

Finally radio group GCap rose 5.9 per cent after the Takeover Panel extended the deadline for suitor Global Radio to make a formal bid.

After trading closed London-based GCap confirmed it would open its books. Shares rose 11.75p to 211p.

DOW JONES 12,199.8 -14

US SHARES reversed an early surge yesterday as a decline in bank stocks, including Bank of America and JPMorgan Chase, punctured an earlier rally.

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Traders said there was disappointment with aspects of bond insurer Ambac Financial Group's capital-raising plan. The Nasdaq rose slightly, helped by Microsoft.

The Dow Jones Industrial Average had earlier risen more than 50 points after a stronger-than-expected reading on the health of the service sector and figures on worker productivity calmed some fears about the frailty of the economy.

The service-sector report was particularly gratifying to Wall Street after a stunning drop in the January index had sent stocks plunging when it was released a month ago.

The Dow was down 14 points, or 0.11 per cent, at 12,199.8 while the Standard & Poor's 500 index was down 0.04 point at 1,326.71. The Nasdaq Composite Index was up 5.73 points, or 0.25 per cent, at 2,266.01.