Financial and insurance stocks rise after good start to reporting season

FTSE:6,085.27 (+48.19) Mid-250:11,807.28 (+57.56) Small Cap:3,290.61 (+1.37)

THE FTSE 100 found support yesterday, as traders reacted to the Bank of England’s latest thinking on inflation and its implications for monetary policy

Its quarterly inflation report predicted that consumer price inflation would fall from its current level of 4 per cent to 1.7 per cent within two years, back below the government-mandated target of 2 per cent.

London’s benchmark equities index climbed throughout the session, but closing auction prices were still not available three days after the London Stock Exchange switched to a new trading technology supplier.

Banks and insurers were at the top of the FTSE leaderboard following well-received numbers from Barclays in the previous session got the industry’s reporting season off to a positive start.

News that Lloyds Banking is to close its Equity Markets operation as part of its withdrawal from non-core operations was also welcomed and its shares rose 0.5 per cent to 67.5p.

Barclays was up 1 per cent to 329.65p, while Royal Bank of Scotland added 4.3 per cent to 47.1p and HSBC gained 2.8 per cent to 717.8p.

Insurers were higher on hopes of further consolidation in the sector, with positive comments by broker Redburn helping. The broker started coverage of Resolution with a “buy” rating, saying it believed the stock could rally by as much as 80 per cent.

Resolution gained 6.3 per cent to 276.33p, while Old Mutual added 3.2 per cent to 135.2p and Prudential climbed 3 per cent to 722.3p.

Real estate stocks were in demand after broker upgrades in the sector from HSBC. Land Securities made the most progress in the sector, up 3.6 per cent to 722.9p after HSBC raised its rating on the stock from “underweight” to “neutral”.

British Land added 2.7 per cent to 555p.

Joshua Raymond, market strategist at City Index, said: “We have continued to see buyer interest in the key banking stocks with the traders still bulled by Barclays earnings.”

Lower down the market, Premier Foods topped the FTSE 250 after analysts at Credit Suisse upgraded their rating on the stock from “neutral” to “outperform”. The stock rose 8.4 per cent to 27.8p. – (Copyright The Financial Times Limited 2011)