RBS boosts FTSE for second day

ROYAL Bank of Scotland shares continued to climb on warming sentiment yesterday, with the part-nationalised bank topping the FTSE 100 for the first two sessions of 2010.

Shares in RBS climbed 3.3p, or 10.3 per cent, to 35.4p, following Monday's 9.9 per cent climb.

While Monday's rise came on the back of a positive note from Exane BNP Paribas, yesterday's climb was driven by general gains in the financial sector.

Barclays was also among the top risers, up 6.3 per cent to 298.1p as analysts at Deutsche Bank said Barclays "offers both growth and recovery potential, and at a discounted valuation".

Lloyds Banking Group, which, like Barclays, is rated a "buy" by Deutsche Bank, rose 1.77p to 54.03p. HSBC rose 10.5p to 737p and Standard Chartered closed up 23p at 1,637p.

Despite predictions that Britain's leading share index would weaken from a December rally, the FTSE 100 closed up 22.16 points at 5,522.5, its highest level in 16 months.

Commodity-related companies were again in favour, and insurers, one of the weakest sector's in Monday's first session for 2010, also climbed.

Edinburgh-based Standard Life rose 4.8p to 216.6p, while Aviva ticked up 8.6p to 403.1p after announcing that it had acquired River Road Asset Management, a US fund manager.

Britain's largest listed hedge fund, Man Group, was among the highest climbers in the index, rising 12.9p to 325.3p.

However, Cadbury shares suffered the biggest fall, on fears its hostile takeover by Kraft may collapse.

First rival Nestle said it would not take part in a bid, then Warren Buffet said his investment company, Berkshire Hathaway, would vote against Kraft's plans.

Shares in Cadbury were down more than 4 per cent at one point, finally closing down 26p, or 3.23 per cent, at 779p.

Smiths Group, the security company, dropped 31p to 1,038p on concerns about privacy issues surrounding body scanning equipment set to be installed in UK airports.

Cairn Energy, which leapt on Monday, closed 8.7p lower yesterday.

Fashion group Next was among the FTSE 100's hardest-hit retail stocks even though it hiked profit forecasts following like-for-like sales growth of 3.2 per cent in the 22 weeks to 24 December.

Shares fell after chief executive Simon Wolfson warned that he expected 2010 to be "tough" as efforts to address the UK's public finances threatened a consumer recovery.

Next shares fell 39p to 2,100p, while high street rival Marks & Spencer, which updates on trading this morning, dropped 7.5p to 404.9p.

In the second tier, retailers were also under pressure, with Currys owner DSG International down 0.9p to 36.99p and HMV 1.3p lower at 95.1p.

Supermarkets were also suffering, ahead of Sainsbury's figures due tomorrow. Sainsbury's shares fell 4.3p to 319.9p and those of rival Tesco dropped 7.95p to 420.45p.

Among the midcap FTSE 250, Wood Group, Scotland's biggest oil services company, rose 2.3p to 319.1p.

The market had closed before traders could digest news from Morgan Stanley, which named Wood as one of its top picks in the sector in 2010, predicting a strong rise in European oil field spending this year.

Among the small caps, Borders pharmaceutical firm ProStrakan fell 1.5p to 85p despite a positive note from analysts at Charles Stanley, which said shares were now trading below their value even based on pessimistic assumptions. Analyst Franc Gregori reiterated his 127p target.