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Bank rally sends FTSE 100 higher

Wednesday, June 27 12:08:37

A rally by recently hard-pressed banking stocks led a bounce back by Britain's top share index today, snapping a four-session losing streak, although low volumes indicated some fragility ahead of another key EU summit.

The FTSE 100 index was up 23.94 points, or 0.4 percent, at 5,470.90 points, with trading volume at just 19 percent of the 90-day daily average.

The UK blue chip index has been stuck in a tight trading range at around 5,435-5,514 points since the start of the week, but is down some 3 percent from a peak of just under 5,624 points on June 20 - indicating a broader downwards trend.

"A few brave souls have edged into the market this morning, but enthusiasm is distinctly lacking, as most traders opt to hold their ground and wait to see what decisions, if any, emerge from the eurozone summit this week," said Chris Beauchamp, Market Analyst at IG Index.

Hopes of the summit yielding any solution to the euro zone debt crisis were very low, however, after German Chancellor Angela Merkel flatly rejected the idea of common euro zone bonds, even though European Council President Herman Van Rompuy on Tuesday put forward the case for them.

"In a way, it would be hard to lower expectations any further, since we have been here many times before, but there is a sense that this time the fallout from any apparent lack of progress will be severe," IG's Beauchamp added.

Banks were the best blue chip performers, bouncing back after sharp recent falls, led by Lloyds up 2.4 percent.

Fledgling banking venture NBNK said it had made a new proposal to buy 632 branches from the bank ahead of a scheduled Lloyds board meeting later on Wednesday.

Lloyds must sell the branches under European State Aid laws and had said it would update shareholders on the process by the end of this week. The Co-operative Group remains its preferred bidder. (C ) Reuters