FTSE closes at 6460

Last Modified: 19 Sep 2007
Source: ITN

London gained almost 3 per cent to end above the 6400 mark for the first time since July as blue chips soared on the US interest rate cut.

The benchmark FTSE 100 index rocketed by 176.7 points to 6460 in a return to levels not seen since before the financial turmoil began to grip markets two months ago.

Financial stocks were back in favour as the 0.5 per cent decrease in US rates added to already positive sentiment from the Bank of England's multi-billion pound funding move yesterday.

But crisis-hit Northern Rock failed to hold on to yesterday's tentative recovery, down 16 per cent, or 49p to 257p as speculation mounted the group was in line for a cut price sale to a rival.

Rumours suggested that Lloyds TSB could come in with a 200p a share bid, while Halifax Bank of Scotland was mooted to be considering a 100p a share approach.

Northern Rock aside, financial stocks under pressure in recent days also continued their recovery with fellow mortgage lender Alliance & Leicester up 3 per cent, or 22.5p at 815.5p as investors regained confidence in the group, putting fears over its funding behind them.

Lloyds TSB and HBOS, the two firms linked with a potential bid for Northern, rose 21p to 540.5p and 35.5p to 874p respectively. Barclays was 32p higher at 639p, while Royal Bank of Scotland gained 12p to 538p.

Insurer Standard Life meanwhile gained 1 per cent, or 2.25p, to 277p as it confirmed its interest in making a possible cash and share offer for closed life specialist Resolution.

Such a move could derail Resolution's agreed merger with Friends Provident. Standard lost some of the gains seen in earlier trading, however, when it had soared by 8 per cent at one stage.

But mining stocks led the FTSE's impressive advance on the back of an increase in base metals prices, with Anglo American the sector's top performer - up 239p to 3129p, or 8 per cent.

Vedanta Resources followed not far behind, up 149p at 2073p. Kazakhmys was also up, by 94p to 1423p and BHP Billiton powered ahead 97p to 1627p as analysts said the sector would gain a boost from the Fed's spur to the economy.

Shares in housebuilder Persimmon - also hit amid the Northern Rock fall-out earlier this week - were back on the road to recovery as well, up 48p to 989p.

In the second tier, specialist mortgage lenders Paragon and Bradford & Bingley returned to strength. B&B was up 32.25p at 328p, while Paragon rose 27p to 327p as yesterday's trading update continued to calm earlier fears it could suffer the same funding crisis as Northern Rock.

Retailer Woolworths was up 3 per cent, or 0.5p, at 20.5p after interim results showed an improvement at its beleaguered retail division.

But fellow FTSE 250 firm Thomas Cook dropped 6p to 279p after news that its UK and Ireland chief executive was quitting.

The biggest FTSE risers were Anglo American up 239p at 3129p, Vedanta Resources up 149p at 2073p, Kazakhmys ahead 94p at 1423p and Xstrata up 193p at 3050p.

The biggest FTSE fallers were Northern Rock off 49p at 257p, Rolls Royce down 2.5p at 513.5p, BY Group down 1.5p at 314p and British American Tobacco down 5p at 1685p.

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