London gains amid reports of deal to boost euro area's bailout fund

FTSE: 5,450.49 (+40.14) Mid-250: 10,231.83 (+52.94) Small Cap: 2,808.28 (+7.25)UK STOCKS rose yesterday amid conflicting newspaper reports that Germany and France have agreed to further boost the euro area's bailout fund, the European Financial Stability Facility.

“The mood in equity markets turned amid suggestions that an agreement had been reached over bolstering the EFSF,” Ben Critchley, a sales trader at IG Index in London, wrote in a note.

“Such suggestions were quickly met with rebuttals, however, it’s been difficult to establish the veracity of either call, so for the time being at least, traders do seem to be taking the glass-half-full approach,” he said.

The Guardiannewspaper reported that Germany and France have agreed to boost the region's rescue fund, known as the EFSF, to €2 trillion from €440 billion.

German finance minister Wolfgang Schaeuble told lawmakers from the country's governing Christian Democratic Union that the euro area may increase the EFSF to a maximum of €1 trillion through an insurance model, Financial Times Deutschlandsaid.

France and Germany are still working on how to increase the power of the rescue fund as part of a comprehensive agreement to help banks and Greece, a person with direct knowledge of the talks told Bloomberg News.

German chancellor Angela Merkel said late yesterday that the euro-area summit on October 23rd will mark an “important step”, though not the final one in solving the debt crisis.

Lloyds rose 3.4 per cent to 33.15p. RBS climbed 3.1 per cent to 24.47p.

BSkyB rallied 5.1 per cent to 710p. The pay-TV broadcaster said fiscal first-quarter profit increased 16 per cent as the company sold more products to its subscribers.

Diageo added 4 per cent to 1,331p. The distiller reported sales growth in its fiscal first quarter that exceeded analysts’ estimates.

Ashtead, a UK equipment-rental firm, rose 6 per cent to 159.8p.

Aegis, an advertising-planning company, climbed 3.3 per cent to 138.7p.

ARM, a designer of chips used in Apple devices, slipped 1.9 per cent to 580.5p after the California-based maker of iPhones and iPads reported profit that missed analysts’ estimates.

Home Retail sank 17 per cent to 99.5p after its first-half earnings slid 70 per cent. – (Bloomberg)