Upbeat bank profit forecast lifts FTSE

Banks, lifted by upbeat broker comment, helped hoist Britain's top share index back above the 6,000 level yesterday as investors shrugged off eurozone debt worries for the time being.

The FTSE 100 index closed up 57.73 points, or 1 per cent, at 6,014.03, bringing a three-day losing streak to an end. But Anthony Grech, head of research at IG Index, warned: "After subdued trading for much of December, we have seen a return to more normal volatility this week."

Concerns over the financial sector's exposure to sovereign debt were also soothed by a pledge from Japan to support Europe's bailout efforts, while Portugal's finance minister said he does not expect his country will need emergency support.

In early trading on Wall Street, the Dow Jones Industrial Average was cheered by earnings reports that came after Monday's close from aluminium giant Alcoa, which posted strong fourth-quarter profits due to stronger demand and prices, and increased guidance from two major US retailers.

The ongoing eurozone debt crisis helped the pound gain strength, rising to near its highest level in four months against the euro at just over €1.20.

Elsewhere, better-than-expected trading results from high street giant Marks & Spencer failed to lift its shares as a cautious outlook spooked investors and prompted shares to fall 10.8p to 373.2p. The drop of 3 per cent came despite UK like-for-like sales growth in the 13 weeks to 1 January of 2.8 per cent.

In the banking sector, the mood was lifted by a note from Citigroup upgrading HSBC and by Societe Generale's comments that profitability should be significantly more sustainable than the market currently expects. Barclays shares rose 15.3p to 292p, while HSBC added more than 2 per cent or 16.3p to 688.7p.

Flavour-of-the-month Arm Holdings continued to enjoy a strong run as the computer chip designer surged towards the top of the risers' board, up 7 per cent or 32.5p at 497.5p. The Cambridge-based firm is still benefiting from last week's announcement from computing giant Microsoft, which intends to develop Windows-based platforms running on ARM-designed chips.

Wolseley jumped 6 per cent after the building supplies firm got a boost from Citigroup and Deutsche Bank as they upgraded their target prices for the blue-chip stock. Shares responded with a rise of 122p to 2,179p.

Capital Shopping Centres - which owns the Braehead centre near Glasgow, among others - was near the bottom of the top tier, down 10.8p to 381.7p, after America's Simon Property Group dropped its 3 billion takeover pursuit of the shopping mall owner.

Simon said it was left with no alternative but to walk away because Capital refused to share due diligence information.Attention will now turn to a meeting of Capital shareholders on 26 January when investors will be asked to approve the company's proposed acquisition of Manchester's Trafford Centre.

Smith & Nephew shed 6 per cent, down 42p to 670p, as the company's continued silence over a reported bid from Johnson & Johnson cooled some of the recent share price froth surrounding the UK-based medical devices maker.