British blue chip stocks rose on Friday as banks rebounded after better-than-expected results from US bank Citigroup in the choppiest session in nearly six months, while a fall in miners curbed gains. The FTSE 100 ended up 90.1 points, or 1.7 percent, at 5,376.4 points, bringing the rise for the week to 1.9 percent.
Making this the first weekly increase in nine weeks and the end of the longest losing stretch since late May 2002. In this latest slide, the index has lost over 15 percent. The FTSE swung between a loss of 1.3 percent and a gain of 1.4 percent in its most volatile day of trade since February 2.
Financial stocks have ranked among the top performing sectors this week in Europe, fuelled by burgeoning optimism that the impact of the credit crunch on bank balance sheets may not get much worse as a string of earnings from high-profile US banks beat expectations.
Citigroup, the largest US bank, was the latest Wall Street institution to beat expectations with its earnings, posting a smaller-than-expected loss that helped push up major indexes in Europe. Banks topped the FTSE list of gainers, with HSBC up 3.7 percent, Royal Bank of Scotland up almost 10 percent and Barclays up 9.7 percent.
"The market was conditioned to expect something really bad and in fact it's not quite as bad as everybody expected, there is a bit of relief," said Mike Lenhoff, chief strategist and head of research at Brewin Dolphin.
"Looking at dividends, on the banks we're back at levels seen in the previous recession. A lot of bad news has been discounted to some extent and finally we did have this technically oversold condition and markets have been waiting for a catalyst to help facilitate a rebound."
The FTSE 350 banking sector has rallied by nearly 11 percent this week, making it one of the best- performing sectors on the UK market. "These securities have been very badly beaten up," said Edward Menashy, an economist at Charles Stanley. "(But) We know one thing - no central bank will allow a major bank to fall."
The British economy is proving a challenge for the banking sector as growth slows and inflation remains stubbornly high. The latest batch of data on Friday showed public borrowing hit record levels in the first quarter of the financial year, threatening to breach the restrictions the government set itself on how much debt it can take on.
Other gainers included GlaxoSmithKline, which rose 2.2 percent after researchers said Britain's decision to choose its Cervarix cervical cancer vaccine over Merck and Co's Gardasil could save the government 20 million pounds ($40 million) annually. AstraZeneca and Shire were up between 1.3 and 2.5 percent.
Homebuilders were among the biggest percentage gainers on the FTSE mid-cap index, taking heart from the rally in other interest-rate sensitive stocks like banks and other financials. Taylor Wimpey was up 8 percent, while Persimmon gained 15.2 percent, Barratt Developments was up 20 percent.
On the downside, miners fell in line with a decline in base metal prices. Xstrata shed 0.8 percent, while BHP Billiton lost 1.7 percent and Rio Tinto 1.3 percent. Tesco was the largest drag on the FTSE, falling 3.3 percent, as its shares succumbed to a broad-based sell-off in European supermarket groups after Belgium's Delhaize slashed its 2008 outlook.
Shares in household and personal care product companies such as Reckitt Benckiser, Henkel and Beiersdorf fell after French beauty group L'Oreal cut its full-year growth outlook late on Thursday, traders said. Reckitt Benckiser fell 2.7 percent, making it one of the largest negative weights on the FTSE 100.