Market report: Footsie surges as banks perk up on rescue in US

It was inevitable the financial sector would lead the charge on the stock market today, in response to the US Government's decision to rescue mortgage lenders Fannie Mae and Freddie Mac with a huge cash injection.

The UK High Street banks have been particularly badly savaged by the credit crunch and in many cases have lost up to two-thirds of their value during the past year, alone.

HBOS rose 36½p to 312p. That compares with the 275p at which it launched a rights issue earlier this year when the bank tapped shareholders for £4 billion. More than 90% of the issue was left with the underwriters.

Dealers said stock market bears had struggled to unwind any remaining open positions. HBOS was pursued by Bradford & Bingley, which climbed 5½p to 45p. Barclays put on 39¾p at 357p with Lloyds TSB adding 28½p at 307½p and Royal Bank of Scotland adding 29p at 248¾p. Standard & Chartered leapt 141p to 1515p while fund manager Schroders rose 135p to 1090p.

The FTSE 100 index posted an early rise of 199.5 points at 5440.2, and that is where it stayed for the rest of the day.

A "connectivity issue" meant many traders were unable to log trades by the London Stock Exchange computerised trading system. The LSE gave no reason for the massive breakdown, saying only that "some" traders were affected.

Plans to hold an auction were put on hold following a six-and-a-half hour delay with dealers asking why there was no back-up system? The LSE share price showed a rise of 60½p to 819p.

Meanwhile, the New York Stock Exchange made a glitch-free start to trading this afternoon, with investors celebrating the rescue of Freddie and Fannie. The Dow was up 244.1 points at 11,465.1.

In London, the continuing lack of liquidity among second-liners was made all the more apparent by the FTSE 250 index, which by late afternoon was still showing an initial rise of 360.2 to 9327.0. Among the better performers was finance outfit Cattles, up 16½p at 126½p, and CSR, 28p ahead at 333¼p.

Among housebuilders, Barratt Developments put on 18p at 165p and Taylor Wimpey 6p at 61½p. Goldman Sachs has raised its rating on Bovis Homes, up 46¼p at 493p, from sell to neutral and lifting its target from 325p to 421p.

There was even scope for improvement among the big pub chain operators which have seen their share values decimated by the credit crunch, the smoking ban and now the slump in the economy.

Even so, against this gloomy backdrop Punch Taverns climbed 26¼p to 295p, while Mitchells & Butlers put on 17p at 292¾p, Enterprise Inns 15¾p to 287½p, and Greene King 23½p to 570p.

Autonomy was up 38p to 1090p on the back of its agreement with AT&T to license its intelligent Data Operating Layer software. Some brokers responded by raising its target from 1150p to 1225p.

There was a brief backwardisation at BG Group after the bid price of 1100p exceeded the offer price of 1077p. The price later settled 50p higher at 1083p. Dealers say the oil and gas explorer is likely to drop its contested £5 billion offer for New Zealand's Origin Energy after accepting a higher offer from ConocoPhillips. Evolution Securities expects to see the BG price boosted by such a move and has repeated its buy rating and 1600p target.

Tullett Prebon jumped 20p to 411½p despite Citigroup starting coverage of the financial markets trader with a sell rating and 390p target. It says the shares have performed strongly in the year to date.

GW Pharmaceuticals firmed 4p to 48p on the back of a bullish study of its cannabis-based pain killer Sativex, which has shown long-term efficacy in the treatment of neuropathic pain due to multiple sclerosis.