FTSE comes back from banking losses

The FTSE 100 closed up 0.7 per cent today to 6049.50.

Royal Bank of Scotland (RBS) led the gains up 8.30 per cent, followed by Home Retail (up 6.13 per cent), AMEC (up 4.12 per cent), Carphone Warehouse (up 3.82), and Standard Life (up 3.76 per cent).

Miners Eurasian and Vedanta Resources saw the greatest falls – down 4.92 per cent and 3.23 per cent – followed by housebuilder Persimmon and HBOS (both down 2.3 per cent) while Sage Group was down 1.54 per cent.

David Jones, chief market strategist at IG Index, said: "The FTSE 100 has clawed back some of yesterday's losses to move back above the 6000 mark.

"After yesterday's weakness throughout the banking sector, sparked by the Bradford & Bingley announcement, it's maybe something of a surprise that a bank tops the blue-chip gainers for the day."

He added: "There are a few factors rumoured to be behind this dash; none of them especially convincing. Firstly, strong demand for the new shares offered via the rights issue; then a rumour that a hedge fund has taken a significant stake and finally the perennial 'profit taking' by short sellers."

Across the banking sector, the RBS is now at levels last seen in since early 2000, Barclays is back to early 2003 levels and HBOS and Alliance & Leicester are setting fresh multi-year lows.

"The dilemma for investors at the moment is not too dissimilar to that seen in previous market sell-offs over the years - at these prices the shares look cheap, but they also get cheaper by the week," Mr Jones said.

"There is still a large degree of nervousness around the banking sect or and what other surprises it may have in store - so many will continue to view any short-term rallies with a healthy degree of scepticism for now."