Hopes of US recovery drives Footsie

LONDON FTSE 100 CLOSE 5,501.64 +7.48

The index had broken through the psychological marker during intra-day trading on Thursday and held on to gains yesterday to close up a modest 7.48 points at 5,501.64.

Thursday's better-than-expected jobs and trade data was followed yesterday by a 1.3 per cent rise in US wholesale inventories - much higher than the 0.4 per cent predicted improvement and a sign that firms expect retail sales will pick up.

David Jones, chief market strategist at IG Index, said: "The FTSE 100 seems to still be in something of a world of its own at the moment. With most of the other major European and US indices still trapped within the recent ranges, the run of strength in the UK is serving to help pull more buyers in and keep the momentum going.

"The London market has started September as flavour of the month and it does bode well for at least some further gains into early next week."

The decent session for London shares was achieved despite uncertainty for banks ahead of rules expected to be finalised tomorrow that will require firms to hold capital reserves of at least 7 per cent.

While most banks' capital ratios are well above that, it represents a marked increase on the capital requirements seen before the financial crisis.

The sector has endured a testing week after high-profile leadership changes at Barclays and HSBC and amid reports that recent stress tests into 91 EU banks were not rigorous enough.

Barclays fell 4.25p to 319.1p but Lloyds Banking Group gained for a second straight session, after a note from UBS on Thursday argued that it looked "over-capitalised" following its 13.5 billion rights issue.

Lloyds' shares rose a further 0.9p to 75.6p, while fellow part-nationalised lender Royal Bank of Scotland lifted 0.4p to 48.5p.

Tullow Oil was the biggest top-flight faller as hopes of a takeover approach for the exploration firm started to fade, leaving it 29p lower at 1,234p.

In a quiet session for corporate news, shares in construction firm Morgan Sindall jumped 7 per cent after it struck a 28 million deal to buy the bulk of the social housing contracts won by collapsed firm Connaught.

Morgan's Staffordshire-based Lovell subsidiary said the newly-acquired contracts would generate around 200m in additional annual revenues. Shares were 47p higher at 708.5p.

Meanwhile, JD Wetherspoon shares fell despite a 7 per cent rise in the pub chain's annual profits and amid signs of a good start to its new financial year. Like-for-like sales were 1.5 per cent higher in the six weeks to 5 September, but this failed to satisfy investors as shares declined 5 per cent or 21p to 422.5p.

Property website Rightmove moved in the opposite direction as investors considered the implications of German publisher Axel Springer's bid for French property website company SeLoger.com. With analysts pondering the chances of a similar move for the UK's biggest player, Rightmove shares edged 5 per cent or 32.5p higher to 740p.