Britain's leading shares ended higher on Friday after a dizzy and choppy session where banks led but trading levels were thin as credit-market liquidity concerns still fizzled. The FTSE 100 was up 32.8 points, or 0.5 percent at 6,397.0 after plummeting 3 percent on Thursday to hit a one-week low in its largest one-day slide since mid-August.
Among leading shares, banks led the blue chip index on a rollercoaster ride with troubled lender Northern Rock climbing 6.9 percent to top the gainers' list. A person familiar with the matter said investment group Olivant will remain in talks to buy the ailing bank after being told it would be treated on an equal footing with a rival.
Banks, which have been hit hard by global credit-market turmoil in recent months, were under renewed pressure after Citigroup unveiled plans to rescue $49 billion of structured investment vehicles, in a move that further strains the biggest US banking group's capital levels. But US stocks trimmed losses on news of a Goldman Sachs upgrade to Citigroup's debt.
HBOS shed 1.1 percent, extending Thursday's losses after a trading update stoked concern that core UK retail banking profits would fall next year and its corporate division could not sustain the 1 billion pounds in investment gains expected this year. Barclays, Royal Bank of Scotland, Standard Chartered and Lloyds TSB gained 1.2 and 2.2 percent.
"It's been a choppy day for the London index as traders continue to try and assess where true value actually lies," said Jimmy Yates, a trader at CMC Markets. On the macro front, a higher rise than expected in US consumer prices raised concern that simmering inflation may hamper further interest rate cuts by the Federal Reserve.
"Conflicting numbers surrounding inflationary pressures from across the Atlantic do seem likely to keep traders somewhat on their toes," Yates added. Further on the upside, Rentokil Initial climbed 3.4 percent after plunging 22 percent on Thursday after the services group said weak retail trading would hit its quarterly profit.
Rexam also rebounded 3.7 percent after heavy losses in the previous session. J.P. Morgan said the sell-off on Rexam was "overdone". Shire was up 3.6 percent after it expanded its pipeline of drugs for gastrointestinal disorders by licensing rights to a Celiac disease medicine from Alba Therapeutics Corp.
Shire will pay US-based Alba $25 million upfront for rights to the product, which is in mid-stage Phase II clinical trials, and sales-based milestones could total up to $300.5 million if future sales reach blockbuster status.
Imperial Tobacco added 2.3 percent as traders cited defensive stock switching. Miners were the biggest losing sector, accounting for more 14 points off the index, as traders cited a Goldman Sachs sector downgrade and the rising dollar.
Anglo American, Vedanta Resources, Antofagasta, Kazakhmys, BHP Billiton, Xstrata and Rio Tinto were down between 0.2 and 4.3 percent.
In other commodities, oil gave up early gains at under $91 a barrel, pressured by an advance in the dollar to seven-week highs and a warning from Opec that an economic slowdown in 2008 could dampen near-record oil prices.
BP advanced 1.6 percent, while Royal Dutch Shell gained 1.3 percent. "A bit infrequent," said Joshua Raymond, a sales trader at City Index, of the market overall. "Generally because the markets have been very volatile recently, particularly overdone in terms of sentiment."
"It'll be quite a wide range (but) ultimately we'll be moving sideways until we enter the new year. We are going through a bit of a transition whereby the dust is finally beginning to settle and we're about to see how much of a kicking the banks stocks have taken," Raymond said.