Rebounding financials fuel gains for FTSE

By MoneyhighStreet Staff. Published on August 22, 2008 This post currently has no comments.

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UK blue chip stocks finished up, with financials benefiting from takeover speculation and the expectation that declines were overestimated.

The FTSE 100 advanced 128.51 to finish up at 5,498.70, with financials leading the gains.

A Reuters report that the Korea Development Bank is looking to acquire Lehman Brothers fuelled gains for HBOS and Barclays

Also enabling the sector to rebound from recent losses was the announcement that US firm Benfeld had made a recommended cash offer for UK-listed insurance broker Aon.

Earlier in the day, the bourse had been hit by the release of official figures showing that the UK economy had stood still during the second quarter.

However, a recovery was engendered when investors realised that the slowing economy is likely to prompt the Bank of England to cut the cost of borrowing, having frozen the key base rate for the last four months in a row.

Jeremy Batstone-Carr, head of private client research at Charles Stanley, said: "The data was weak, but not as weak as some had expected, and it boosts expectations that the Bank of England is going to cut interest rates when headline inflation comes under control."