US jobless figures keeps FTSE rising

Credit agency Moody’s downgraded its ratings for European lenders, including Britain’s Lloyds Banking Group and Royal Bank of Scotland.

The agency said the downgrade reflected its view that the UK government is less likely to bail out the banks, rather than being a judgment of their balance-sheet strength.

News that US employers added 103,000 jobs in September – almost double forecasts – buoyed the market, sending the benchmark FTSE 100 index up 70 points at one stage, before it settled 12.14 points higher at 5,303.4.

Investors were still looking for a cohesive strategy from politicians in the European Union as Germany and France remained split ahead of crucial talks tomorrow over how to strengthen shaky banks and fight financial market contagion to prepare for a possible Greek default.

Lothar Mentel, chief investment officer at Octopus Investments, said: “Within Europe, sentiment remains close to the bottom. Even if the politicians can pull a magic rabbit out of the hat, investors will need to get used to the aftermath, which will likely be, at best, a lengthy period of low growth or, at worst, a formidable recession.”

Banks expressed their disappointment at Moody’s review, which left Lloyds at the foot of the FTSE 100, down 1.2p at 34.7p.

Barclays fell 3.2p to 164.7p, even though it was not one of the banks downgraded.

RBS was also unsettled by reports it may need another round of funding to bolster its balance sheet. That would mean UK taxpayers, who already own 83 per cent after 2008’s bailout, having to stump up again. RBS shares fell 0.7p to 23.6p even though the bank rejected the reports.

Paul Geddes, chief executive of RBS’s insurance arm, sold 176,211 shares at 23.544p each, netting himself just under £45,000.

On currency markets, the pound rallied strongly to €1.16 against the euro and to $1.56 versus the dollar following a slide yesterday on the £75 billion boost to the UK’s quantitative easing programme.

Hovis-owner Premier Foods issued a major profits warning, affecting fellow food stocks Unilever and Kingsmill-maker Associated British Foods.

Premier – Britain’s biggest food manufacturer, which has brands including Branston and Sharwood’s – said sales volumes were down 8 per cent in the three months to 30 September as shoppers opted for more own-label products in the current downturn. Premier’s shares crashed 42 per cent or 4.2p to 5.8p in the FTSE 250 index.

Among top-flight shares, Unilever fell 30p to 2,020p and AB Foods eased 8p to 1,091p.

Retailers picked up despite poor weekly sales figures from department store chain John Lewis, which blamed unseasonally warm weather. Supermarket operator Morrisons rose by 2.5p to 300.7p and, in the FTSE 250, John Lewis’s rival, Debenhams, rose by 4.3p to 62.8p.

Mothercare also ended a tough week on a better note as shares added 9.4p to 189p following their collapse on Wednesday after a shock profit warning.