UK stocks rallied for a second consecutive session yesterday, led by financials, but a slide in mining stocks prevented the London market from notching up impressive gains.
The FTSE-100 blue-chip index briefly rose above the key 5000-point support level to 5012.2 but fell back late in the day as the US market posted early losses. The Footsie closed 57.14 points higher at 4959.59.
Wall Street opened lower, with investors remaining on edge amid uncertainty over whether the controversial $700bn bail-out package will make it through Congress. The Dow Jones Industrial Average shed more than 125 points soon after the opening bell, weighed down by falling financials.
US stocks surged on Tuesday - though they did not recover fully from Monday's 777-point tumble - on hopes some form of the economic rescue bill will be passed in Congress after an initial defeat on Monday in the House of Representatives.
General Electric shares fell sharply yesterday after an analyst said the conglomerate may see a drop in profit next year.
GE last week warned investors that earnings this year could fall as much as 12% as volatile global credits markets take a toll on its hefty finance arm. However, its shares managed to close 18 cents higher at $25.68 last night.
The direction of interest rates was in the spotlight as Goldman Sachs analysts said they are expecting cuts in the cost of credit from the Federal Reserve, as well as easing by the European Central Bank.
The Dow closed 19.59 points lower at 10,831.07.
In London dealing, HBOS, the Edinburgh-based banking group, rose after Prime Minister Gordon Brown said he is confident that a $17.8bn takeover by Lloyd's TSB will go through. The group's stock rose 25.7p to 148.1p, more than recouping a 14% fall on Tuesday amid concerns the rescue may have to be repriced.
Lloyds TSB followed close behind, adding 23.5p to 250p, while elsewhere in the sector Barclays advanced by 14.5p to 341p, or 4%. Royal Bank of Scotland was up 1p at 180p.
Mining stocks fell after Xstrata's decision to drop its £5bn Lonmin bid due to turmoil in global credit markets and metals prices plunged. Copper prices fell more than 3% and aluminium dropped by more than 1%. Other metals also retreated.
Xstrata lost 33p to 1683p, while Lonmin fell more than 20%, or 461p, to 1813p - making it the leading Footsie faller.
Xstrata has increased its stake in Lonmin. It said it bought more than 22.2 million shares for 1979p a share - or about £440m - far less than the £33 it offered Lonmin investors in August.
Supermarket group Tesco enjoyed another winning session after it posted first-half profits of £1.43bn earlier in the week. The firm added 6.9p to 394.5p after Brewin Dolphin analysts also emphasised the defensive nature of the food retail sector.
Wm Morrison added 6p to 264.5p, although J Sainsbury was 8.5p down to 339.5p. Marks & Spencer rose 8.75p to 210.25p ahead of an eagerly-awaited trading update today.
The possibility that the Bank of England might cut base rates at its next meeting pushed several housebuilders higher in the FTSE-250 index.
Barratt Developments closed 4.75p stronger at 109.5p, while Bovis added 8.5p to 385.5p.
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