Britain's leading shares held onto earlier gains on Friday as banks felt the benefit of an interest rate cut, miners rose thanks to consolidation talk and US jobs data gave an additional lift. The FTSE 100 index was up 69.3 points, or 1.1 percent at 6,554.9, rebounding from the previous session's losses.
Midway through the day, a US government report showed the United States added slightly more jobs than expected in November, easing economic concerns but keeping alive hopes of an interest rate cut across the Atlantic next week.
Talk of market consolidation was the biggest boost for miners. Xstrata jumped 7.9 percent as traders pointed to talk of Anglo American looking to buy the Swiss miner. Xstrata declined comment while Anglo American was not immediately available. Anglo, linked to a bid for Xstrata last week, gained 5.1 percent and Antofagasta tacked on 5.2 percent.
Consolidation talk has swirled around the sector since BHP's bid for Rio Tinto on November 8, which has so far been resisted. Banks also swam in a sea of blue thanks to Thursday's rate cut from the Bank of England (BoE) and positive sentiment from the United States. HBSC and Royal Bank of Scotland extended two-day gains, up 1.7 percent and 1 percent, respectively.
Barclays was up 2.4 percent and HBOS rose 0.4 percent. "There was a bit of a relief that the US non-farm payrolls data wasn't too bad," said Daniel Briggs, a fund manager at Sarasin Chiswell. "The market started off quite strongly as well." "It is just a follow through (from BoE) but to be perfectly honest, it's very, very thin trade at the moment - there have been very few stock stories that I've picked up on."
Volatile Northern Rock was up 7.4 percent after an investment group led by veteran trouble-shooter Luqman Arnold made a long-awaited rescue proposal for the bank, while another suitor, US buyout firm J.C. Flowers, pulled out of the bidding. Housebuilders and property firms also firmed following the BoE's quarter point rate cut to 5.5 percent and the announcement of a US government-backed plan to prevent a fresh wave of defaults on home loans. Taylor Wimpey was up 7.6 percent, Persimmonrose 5.8 percent, Wolseley advanced 6.9 percent, and Barratt Developments climbed 4.1 percent.
The US plan is aimed at lessening the negative effect on borrowers of adjustable-rate mortgages being reset higher in the next two years, which many had feared would lead to a wave of foreclosures.
"Generally there is a little bit more poise in the markets... and generally there is a sense that we are not necessarily going to have a recessionary outlook which a lot of people had feared the previous week," added Sarasin Chiswell's Briggs. "One generally gets a rally at the end of the year because there isn't a lot of fundamental company news or other news."
In negative territory, tobacco stocks dipped as traders cited profit taking in the sector after many of the stocks hit record highs in recent sessions. British American Tobacco lost 1.3 percent and Imperial Tobacco fell 1.7 percent.
BSkyB shares closed down 0.6 percent after the company announced Rupert Murdoch's younger son James will leave the chief executive post to lead News Corp's Asian and European operations.A negative broker note and worries about an investigation by the Competition Commission over the broadcaster's stake in ITV also weighed on the stock, one trader added.
Further on the downside, Associated British Foods shed 1.6 percent after the Silver Spoon sugar refiner and owner of Primark fashion stores warned that the European Union's sugar regime reform would hit its profits in its current year.
Among midcaps, shares in dairy firms Dairy Crest added 8.7 percent after fines from Britain's consumer watchdog the Office of Fair Trading for fixing milk, butter and cheese are not as hefty as feared. Supermarkets linked to the price-fixing allegations, included J Sainsbury Tesco and WM Morrison. They all fell around 0.5 percent.