Financial stocks boost London market as fears about Italian banks ease
Financial stocks led the charge on the London market as concerns eased over the state of Italy's beleaguered banking industry.
The FTSE 100 Index closed up 33.01 points to 6,779.84, as British lenders raced ahead on reports that the world's oldest bank, Italy's Monte dei Paschi di Siena, might be handed a state bailout to shore up its balance sheet.
Royal Bank of Scotland was the biggest riser on the London market, climbing 5% or 11.3p to 209.1p, while Barclays rose more than 4% or 9.9p to 226.8p.
Analysts are fearful that Italian banks, many of which are burdened by bad debt, may struggle to find refinancing during a period of political uncertainty, with Prime Minister Matteo Renzi tendering his resignation following the "no" vote in Italy's referendum on constitutional reform.
Monte dei Paschi was looking to raise 5 billion euros (£4.2 billion) from investors as part of its turnaround plan. S uccess now hinges on it finding an institutional investor to contribute 1 billion euros (£844 million) of that total.
However, investors may be wary about ploughing funds into the Italian lender amid uncertainty over what the next Italian Government will bring.
Two former cooperative banks, Veneto Banca and Banca Popolare di Vicenza, received cash injections and were taken over by a government-organised fund after small investors lost between 11 billion euros (£9.3 billion) and 12.4 billion euros (£10.5 billion) last year.
A failure of Monte dei Paschi could potentially add to the number of Italian investors who see their savings evaporate, spreading more woe throughout the economy.
In Europe, Germany's Dax was up 0.9% and the Cac 40 in France rose 1.3%.
The price of oil dropped for the first time since Opec reached a landmark agreement to support prices by cutting supply.
Brent crude dropped more than 2% to 53.81 US dollars a barrel amid fears that the cartel's deal could be undermined.
On the currency markets, the pound hit a two-month high against the US dollar, before falling 0.4% to 1.268.
Sterling came under pressure after the greenback strengthened on hopes that the steady US economy may force the US Federal Reserve to raise interest rates sooner than initially thought.
The pound was up 0.2% versus the euro at 1.184.
In UK stocks, shares in power station owner Drax soared 12%, or 33.6p to 311.2p, following a £340 million deal to buy gas and electricity supplier Opus Energy.
The group said the takeover of small business supplier Opus - which has more than 265,000 customer meters - will combine with its existing Haven Power provider to create Britain's fifth biggest non-domestic energy retailer.
Construction equipment firm Ashtead rose 1% after reporting a healthy increase in half-year profits, helped by the collapse in the value of the pound.
Shares were up 16p to 1,556p after it said that pre-tax profit rose 25% to £413 million in the six months to October 31 as organic growth and acquisitions also boosted the balance sheet.
The biggest risers on the FTSE 100 Index were Royal Bank of Scotland up 11.3 to 209.1, Barclays up 9.9p to 226.8p, HSBC up 27.3p to 654p, Travis Perkins up 48p to 1,405p.
The biggest fallers on the FTSE 100 Index were Anglo American down 48.5p to 1,194.5p, Johnson Matthey down 89p to 3,004p, Paddy Power Betfair down 215p to 8,135p, Sage Group down 13.5p to 619.5p.