Peter Ranscombe: City welcomes Citi's news on profits

AMERICAN bank Citigroup's better-than-expected quarterly results gave the London market a late boost yesterday as banking stocks rose higher.

Citi, about 12 per cent of which is owned by the US government, made profits of $2.15 billion (1.4bn) between July and September - beating market forecasts and raising investor hopes for a decent third-quarter reporting season from banks worldwide.

After a slow start, the FTSE 100 Index closed 39.15 points or 0.7 per cent higher at 5,742.52, while the Dow Jones Industrial Average in America also rose in early trading after the news.

But Anthony Grech, head of research at IG Index, warned: "There is still a degree of sitting on hands as traders wait for the big releases tomorrow with the monetary policy committee meeting minutes and the spending review.

"Equities continue to look toppy and the potential for some profit taking as we edge toward fresh highs for the year cannot be overlooked either."

US data showing improved home-builder confidence also provided encouragement, offsetting disappointing news that industrial production slipped 0.2 per cent in September.

Banking stocks were among the main gainers on the Footsie following the results, with Lloyds Banking Group advancing 2p to 72.2p, Barclays ahead 4.25p at 289.25p and HSBC up 7.1p at 660.4p.

BT continued to rise after a statement on Friday allayed fears about the telecom firm's exposure to government spending cuts. The group, which is one of Whitehall's largest suppliers of IT network services, has signed an agreement that means all of its contracts remain in place. Shares rose another 1 per cent, or 2.2p, to 149.6p yesterday.

But there was pressure on mining stocks caused by a rebound for the beleaguered dollar. A signal from Federal Reserve chairman Ben Bernanke that more quantitative easing was on the cards dealt a fresh blow to the greenback on Friday, leaving it at a nine-month low against the pound.

The dollar fought back from last week's lows yesterday, with the pound falling to just under $1.59.

Randgold Resources featured on the fallers board with a drop of 145p to 6,420p, while a fall in copper prices and a downgrade from HSBC meant Xstrata eased 6p to 1,305.5p.

Miners Rio Tinto and BHP Billiton were also weak after plans for an iron ore joint venture in western Australia were called off in the face of opposition from regulators in Australia, Europe and Asia.

The setback had been expected by investors, limiting the decline in the two share prices as BHP fell 14p to 2,185.5p and Rio Tinto dropped 63p to 4,080p.

In corporate news, Vertu Motors soared 18 per cent after it posted a rise in first-half profits and said it was trading ahead of expectations following a strong new car performance in the key trading month of September.Shares were 4.5p higher at 33p.

Shares in Peroni Nastro Azzurro brewer SABMiller were up after the company posted a rise in sales volumes in the six months to 30 September, helped by double-digit gains in lager volumes in Asia and Africa. Shares rose 9.5p to 2,069p.