Britain's blue chip share index jumped 1.2 percent on Thursday, its strongest showing in six weeks, as rebounding banks and mining stocks offset a slump in Carphone Warehouse and weaker retailers. The FTSE 100 gained 67.2 points to end at 5,790.5, its biggest percentage daily gain since May 2, helped by US data that showed surprising strength in consumer spending.
Traders said short-covering contributed to a 9.7 percent rise in bank HBOS, while Barclays, Royal Bank of Scotland, HSBC and Lloyds TSB gained between 1.5 and 7.9 percent.
Standard Chartered rose 6.9 percent to feature among one of the leading FTSE 100 gainers after Goldman Sachs upgraded the bank's Hong Kong listing to "buy" as well as adding it to its Asia Pacific Buy List. "It has been another very volatile day and we are just seeing a little bit of reaction to a couple of days of losses," said Roger Cursley, UK strategist at Investec.
"(But) It's difficult to see much strength coming through from the banks, given that we have got one rights issue to worry about in the form of HBOS. The economic outlook is far from rosy. We have slowing growth and rising inflation."
Miners also gained, with BHP Billiton, Rio Tinto, Vedanta Resources, Antofagasta and Anglo American up between 0.7 and 4 percent. "When we get a market which has been generally negative for so long, then obviously you are going to get days when you have a bit of bounce," said Peter Dixon, UK economist at Commerzbank. The UK market got support from other markets, with major US and European indexes rising after the release of US consumer spending data, while oil fell nearly $4 a barrel.
Weaker oil prices brought down energy shares, however, with Royal Dutch Shell, gas producer BG Group, Cairn Energy and Scottish & Southern Energy all down between 1.2 and 3.5 percent. An uncertain outlook weighed on Home Retail, Britain's top household goods retailer, which posted flat first-quarter underlying sales at its main Argos chain. Home Retail fell nearly 4 percent.
Tougher lending terms forced Britain's first-time home buyers to put down average deposits of 13 percent in April, the highest level in more than three years, the Council of Mortgage Lenders said. The Times newspaper quoted Philip Green, who owns the Topshop fashion chain, as saying the worst of the credit crunch has yet to hit the high street, offering the latest sign that retailers may not feel the full effect until next year.
Carphone Warehouse fell by as much as 19 percent after Europe's biggest independent mobile retailer said broadband demand slowed and it was cautious about the year ahead. The shares closed down 11 percent, with over 30 million shares changing hands, against a 30 day daily average of 8.54 million.
"Given the current conditions, coupled with scope for unemployment conditions to deteriorate, contraction in retail expenditure appears to have only just begun," analysts at Kaupthing said in a research note. Britain's general retail sector has fallen 20 percent in the past month, and 12 percent in the past week, as a string of data pointed to a slowing economy, while rising inflation has damped hopes of interest rates cuts. Within the retail sector, Kingfisher and Debenhams were down between 4.3 and 4.7 percent.
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