Markets: Scent of fresh money lifts sentiment

Bank shares surged on Wednesday amid a wider market rally as hopes of fresh money printing on both sides of the Atlantic stoked investor confidence.

Britain’s benchmark FTSE 100 index leapt 123.92 points, or almost 2.4 per cent, to close at 5,384.11 as UK equities played catch-up with the rest of Europe after the four-day jubilee weekend.

There were gains of 2.1 per cent and 2.4 per cent for Germany’s Dax and France’s Cac, respectively.

Hopes grew that Spain will be given a cash injection to stabilise its wobbling banking sector, despite officials playing down reports it has asked for a bail-out.

There was also mounting speculation that the Bank of England will move to increase its quantitative easing programme today, while the US Federal Reserve may also signal more money printing is on the cards after weak jobs figures came out last week.

Financial and mining stocks enjoyed a strong run after taking a battering last week, with Barclays adding 8 per cent, or 14.3p to 187.8p, Man Group ahead 5.4p at 80.9p, and Vedanta Resources 80p higher at 963.5p.

Investors may have been thrown by Royal Bank of Scotland’s share price, which shot up from just under 20p on Friday to 213.2p as a result of a share consolidation authorised by the bank’s annual meeting last week. Shareholders will be handed one new share for every ten they own, which pushed the bank’s share price up to a value not seen since September 2008.

In real terms, the shares were 6.7 per cent higher on the day.

Diageo featured on the risers’ board after it unveiled plans to invest £1 billion in Scotch whisky production over the next five years.

Shares were 4 per cent higher, gaining 64.5p to 1,581p.

Vodafone was the biggest top-flight faller, sliding 3 per cent or 4.7p to 169p, as it confirmed it was in talks with Telstra to buy its New Zealand subsidiary, TelstraClear.

Wall Street closed higher on word of moves to rescue Spanish banks and the Federal Reserve’s Beige Book summary, which reported that US economic growth picked up over the two prior months and staff hiring showed signs of a modest increase.

The blue-chip Dow Jones Industrial Average closed the session up 286.84 points at 12,414.79.