Banks boost takes FTSE forward

News that Lloyds Banking Group, part-owned by the UK taxpayer, now expects to make a profit was overshadowed by comments that the trend on loan impairments was better than it expected.

Analysts at Killik & Co said the news would drive up forecasts on Lloyds, but cautioned against too much excitement.

"Momentum is clearly behind the shares at present, but we would reiterate that Lloyds remains a pure play on UK economic growth, on which we remain cautious," its analysts noted.

Lloyds Banking Group was the strongest gainer in the FTSE 100, climbing by 8 per cent to 60.13p. Royal Bank of Scotland was also lifted by the news, on hopes that its own bad debt trends will have been boosted. Shares in the Edinburgh-based bank rose 2p to 44p.

Elsewhere, the market was driven by differences of opinion over whether risk appetite is rising. A surprise interest rate hike in India sparked nerves about investing in emerging markets, although in the end most defensive shares closed the session lower, as traders favoured financial shares. IG Index trader Philip Gillett said: "The market is fairly well supported, but is fairly directionless before the Budget next week and we're unlikely to see a great deal of movement before then."

Overall, the FTSE 100 index of Britain's biggest listed companies rose slightly, ending the final session of the week up 7.51 points at 5,650.13, its highest closing level since June 2008.

Utilities, usually among the most defensive investments, were mostly down. British Gas-owner Centrica fell 7.1p to 290.9p, while International Power dropped 4.5p to 323.5p and National Grid closed off 9p at 640p.

Financial firms were in favour as Man Group, the world's largest listed hedge fund, and fund management giant Schroders both climbed 1.4 per cent.

Resolution, the insurance- focused takeover vehicle, rose 1.4 per cent. Analysts at Deutsche Bank kept their "hold" rating and cut their target price on the firm, but said results next week could cast a spotlight on an "unreasonably cheap valuation".

Aggreko, the Glasgow-based temporary power provider, continued its seemingly endless rise, climbing 24p or 2.1 per cent to yet another record high of 1,178p.

After Aggreko gave tentatively positive guidance with its 2009 results, the company's shares have risen by more than 20 per cent in just over three weeks.

Mining and energy companies were broadly lower, as a stronger dollar weighed on commodity prices.

Vedanta Resources was the biggest faller in the top flight, shedding 84p to 2,622p, while Randgold Resources dropped 127p to 4,810p.

Edinburgh-based oil explorer Cairn Energy fell off Thursday's record high, dropping 10.1p to 384p. Shares have been surging ahead of next week's 2009 results, where the company is expected to update the market on its findings so far in Greenland.

Outside the top flight, Robert Wiseman Dairies rose 5.2p or 1 per cent to 501p on news that the company has purchased 250,000 of its own shares for cancellation yesterday.

The group, which has its headquarters in East Kilbride, has bought back millions of shares in recent years, effectively increasing the stakes of remaining shareholders.

Sports Direct fell 0.7p to 105.1p after Blacks, the outdoor clothing retailer, dismissed its 26.4 million takeover bid as "wholly inadequate". Blacks dropped 0.5 to 60.5p.