Portuguese bond sale gives FTSE a lift

A SUCCESSFUL bond auction in Portugal helped to ease eurozone debt worries yesterday and allowed the FTSE 100 Index to surge ahead.

The Footsie closed 36.69 points or 0.6 per cent ahead at 6,050.72 after Portugal managed to borrow €1.25 billion (1bn) in a bond auction, which saw strong demand.

Many economists have sounded fears that Portugal is set to follow in the footsteps of Greece and Ireland and be forced to ask for a bailout from the European Union and International Monetary Fund.

But the auction - viewed as encouraging by analysts and seen as a key test of investors' confidence in Portugal - lifted sentiment and saw some of Britain's biggest banks make gains. Ben Critchley, sales trader at IG Index, said: "European markets can breathe a little easier after a successful bond auction in Portugal."

The news also gave confidence to other global stock markets, as the Dow Jones Industrial Average in America rose 0.8 per cent in early trading, while Germany's Dax and France's CAC were up 1.8 per cent and 2.1 per cent respectively.

Among UK banks on the advance, HSBC added 26.3p at 715p, Lloyds rose 1.5p at 67.7p, while Barclays, which is believed to be heavily exposed to the Iberian peninsula, advanced nearly 4 per cent or 10.6p to 302.6p.

Sentiment was also boosted by Japan's pledge to buy bonds aimed at financing Europe's bailout fund.

Mining companies led the Footsie higher, making up three of the top four risers, lifted by strong metal prices, with Eurasian Natural Resources up 47p at 1,125p, Vedanta adding 103p at 2,514p, and Kazakhmys ahead 59p at 1,671p.

The retail sector was once again in focus after Sainsbury's reported better-than-expected like-for-like sales growth of 3.6 per cent in the 14 weeks to 8 January. The update fuelled speculation that Sainsbury's has overtaken Asda as the UK's second largest supermarket, but broker Seymour Pierce kept its "sell" rating on the stock and said shares had a premium valuation.

The stock was 8.4p lower at 382p, while rival Tesco fell 1.7p to 423.7p ahead of its own update today.

One of the biggest gains in the FTSE 250 Index came from Superdry fashion firm SuperGroup after it said it enjoyed its best ever Christmas trading with a near doubling of retail sales.

Shares recovered from a recent wobble to surge 19 per cent or 226p to 1,390p as the chain forecast profits at the top end of hopes and said rising cotton prices will not have an impact on this year's profit margins as previously expected.

Shares in Barratt Developments dropped 2.1 per cent or 2p to 92.9p after the housebuilder warned activity was hampered during a difficult December.Arctic conditions held back completions as buyers were unable to visit sites, while it said some build projects could not be finished.

Other housebuilders followed suit, with Bovis Homes down 10.7p at 413p and Persimmon off 8.3p at 432.1p.

The pound was slightly up against the euro at €1.20 and the dollar at $1.57 as speculators decided the growing trade deficit was due to one off-factors.