Friday evening business bulletin

Aug 22 2008 By Andrew Mernin

The London market finished the week with a flourish today after gloomy economic data fuelled hopes for an early cut in interest rates.

A strong start to trading on Wall Street added to earlier gains as the FTSE 100 Index closed 135.4 points higher at 5505.6, a rise of 2.5%.

The main interest of the session involved GDP figures, which were revised to show no growth between April and June - the worst performance for 16 years.

But analysts looked on the bright side of the second quarter figure as it increased the chances that the Bank of England will lower rates from 5%.

Such a prospect lifted financial, housebuilding and property shares at a time of weaker consumer confidence.

Financial firms were further cheered by takeover activity, after insurance broker Benfield attracted a bid from American giant Aon and amid speculation in the United States of a Korean bid for troubled bank Lehman Brothers.

Halifax Bank of Scotland was one of the biggest risers, up 6% or 17p to 289p. Royal Bank of Scotland added 11.25p to 220.75p, while Lloyds TSB cheered 19.5p to 299.5p, a gain of 7%.

The same rates hope buoyed housebuilders after strong gains seen yesterday in the wake of reassuring comments from Charles Church owner Persimmon.

Taylor Wimpey, which is due to report results next week, gained 3.25p to 45.5p, alongside a further rise for Persimmon of 33p to 360p.

Property firms joined in the rally, with Hammerson up 45p at 918p and Liberty International top of the risers board after a gain of 70p to 945p. Analysts said Liberty’s improvement came after a major investor increased its stake.

A shortened fallers board was frequented by commodity firms after the price of oil steadied following a gain of five US dollars yesterday. Cairn Energy, which is also due to post results in the coming days, fell 10p to 2866p.

International Power was another faller after it said the two units at its Rugeley power station in Staffordshire were likely to be out of action until late September at the earliest. The financial impact, before any insurance recoveries, is estimated at around £70 million, but shares recovered at the end of the session to leave IP half a penny higher at 389p.

Aside from the economic update, there was little in the way of major corporate news to move shares ahead of the long bank holiday weekend.

In the second tier, Rentokil Initial shares slid 6% after the company slashed its dividend by nearly 70% and warned it faced a lengthy battle to revive its fortunes. With four profit warnings already under its belt, the latest update did little for confidence and caused shares to fall 4.5p to 69.25p.

The pound at 4:30pm was US$1.8527 compared to US$1.8753 at the previous close while the euro at 4:30pm was £0.7985 compared to £0.7931 at the previous close.