Investors shrug off Osborne bank raid

The Footsie pushed to a fresh two-and-a-half-year high yesterday after the banking sector shrugged off UK government plans to increase the rate of its new levy.

The London market closed ahead despite mining stocks suffering losses as investors feared China's decision to raise interest rates would weaken the country's hunger for commodities.

The FTSE 100 Index clawed back earlier losses to finish up 40.3 points or almost 0.7 per cent to 6,091.33, its highest close since May 2008.

Ben Critchley, sales trader at IG Index, said: "It was something of a quiet day's trade in London, but once again investors maintained their positive stance.

"A good opening for US markets, with the Dow Jones setting fresh 31-month highs in early trading, helped to lift UK blue-chips late in the session."

Chancellor George Osborne's decision to change the terms of the banking levy to raise a further 800 million this year was not enough to deter investors from banking stocks, with Barclays and Royal Bank of Scotland closing up 1.6p to 314.4p and 0.3p to 44.5p respectively. HSBC was also up 12.1p to 718.1p and Lloyds rose 1.4p to 66p.

The pound was down against both the euro and the dollar, at $1.61 and €1.18 respectively, as it lost gains from earlier in the week when investors speculated the Bank of England will raise interest rates tomorrow.

Marks & Spencer's success in poaching a senior Tesco executive Laura Wade-Gery to lead its internet expansion caused M&S's shares to jump more than 4 per cent, up 13.5p to 373.3p, while Tesco was down 6.1p at 396p. The appointment should help chief executive Marc Bolland's quest to lift web sales from 400m to at least 800m by 2013-14.

Stocks on the back foot included Essar Energy off 5.5p to 528p, Eurasian Natural Resources down 15p to 1,029p and Kazakhmys off 9p at 1,622p.

Some of the stocks to make progress in a strong session on Monday gave back a slice of their gains, with chip designer Arm off 16p at 595p and Edinburgh-based oil and gas explorer Cairn Energy, down 10.4p to 425p.

Shares in Edinburgh-based oil and gas minnow Bowleven were down 1.5 per cent, or 5.5p, to 355.75p despite analysts at Evolution Securities upgrading the stock to "buy".

In corporate results, BG Group shares added 30p to 1,470p after fourth-quarter figures exceeded market expectations as higher energy prices helped the exploration giant offset a drop in oil and gas production. BG also upgraded its long-term production targets, notably for Brazil and the United States.

Thomas Cook shares rose 2 per cent despite its warning that political unrest in travel hotspots Egypt and Tunisia would hit second-quarter profits by about 20m. Analysts said the rest of the winter offered encouragement, while the company has looked to offset the North African pressure by switching customers to different holiday destinations.Shares rose 4.3p to 197.8p.

Wolfson Microelectronics fell 12p, or 4.2 per cent, to 272p despite strong annual results. Analysts were disappointed with its fourth-quarter profits, which were lower than expected after a problem with one of its suppliers.