Lloyds Banking Group has cantered into pole position, galloping up 1.16 to 24.78p, after Exane awarded The Black Horse a double upgrade. Exane lifted its rating on the lender to "outperform" from "underperform", arguing that there was potentially 65pc upside to the current share price.
The broker highlighted that Lloyds's balance sheet is far stronger today than in 2008/2009, when concerns over a full nationalisation carried real weight:
With the group able to get through 2012, and possibly 2013, without needing
to raise any unsecured term debt, the risk of a liquidity freeze seems
remote, particularly with central bank liquidity more readily available.
Commenting on the rally, Simon Denham, head of Capital Spreads, said:
Maybe Father Christmas is going to deliver for equity investors after all
following a strong rally in US markets yesterday on the back of – not very
much in all honesty. This is why the markets are so difficult to predict at
the moment when things on a macro level look really dire few would expect
investors to jump into stocks and expose themselves to risk.
Despite all that’s going on in the overall economy and the prospect of a recession in Europe next year, this doesn’t necessarily mean that you should sell equities now. Indices are forward looking barometers and they look beyond any potential recession in Europe or the UK next year and even if it comes later than expected it is unlikely to be an especially deep one, unless of course we see a worst case scenario of a complete European break up.
8.30am: Banks lead the charge as FTSE extends gains
Banks were the biggest risers with bailed-out banks Lloyds and RBS up 1.2pc and 0.8pc respectively, and Barclays gaining 0.7pc.
Household products group Reckitt Benckiser was the biggest faller, down 0.41pc.
Earlier, Asian stock markets joined an end of year rally that begain in Europe and the US on Tuesday on positive economic data from the United States and Germany, a successful Spanish bond auction and fading jitters over the death of North Korean leader Kim Jong Il.
In Germany, a research group reported business confidence rose unexpectedly this month while consumers were resilient, and the US Commerce Department reported unexpectedly strong November home starts at their highest level since April 2010 and up 9.3pc from October.
Ric Spooner, chief market analyst for Australia's CMC Markets said:
We're being driven by what happened in Europe and the US last night. We got
some reasonably good news in the form of the well-bid Spanish bond auction
and better-than-expected US housing starts.
Tuesday's market report
SABMiller froth flattened despite Foster’s fizz
FTSE live: market report - as it happened December 20, 2011
Monday's market report
Betting businesses play their cards right
FTSE live: market report - as it happened December 19, 2011
Friday's market report
FTSE live: market report - as it happened December 16, 2011
Thursday's market report
BP rumoured to be talking to Ophir Energy
FTSE live: market report: as it happened, December 15, 2011
Wednesday's market report
