FTSE closes almost 50 points higher
London's FTSE 100 Index shrugged off concerns in the banking sector today as a buoyant session on Wall Street helped blue chips make gains.
Lloyds Banking Group and Royal Bank of Scotland were among the heaviest fallers on the Footsie after a speech by the chairman of the Independent Banking Commission sparked fears over plans to overhaul the industry.
But the wider FTSE 100 closed 0.8% or 47.6 points higher at 5943.9, mirroring early session gains on US markets.
The Dow Jones Industrial Average rose 0.8%, boosted by technology stocks as Intel revealed plans to increase its dividend.
McDonald's released figures revealing a 2% rise in fourth quarter net income - in line with market expectations, but growth had slowed on the previous three months as major markets were hit by poor weather.
The pound fell back against most major currencies as traders took profits off the table after last week's surge on interest rate hike speculation.
Sterling fell to €1.17, although it held firm at $1.60.
Lloyds suffered the biggest loss on the Footsie in a poor session for banks following a speech by ICB chairman John Vickers.
He appeared to rule out a full-scale break-up of the banks, but mulled plans to ring-fence their retail operations from investment banking and said important institutions should be required to hold more core capital than in the current regime.
Lloyds closed more than 3% lower or 2.3p to 65.1p, while Royal Bank of Scotland dropped 0.9p to 44.1p and Barclays fell 0.4p to 300.5p.
The latest political turmoil in Ireland, where the Government is on the brink of collapse, added to fears over the sector's exposure to the country and the eurozone debt woes in general.
The other main interest of the session came from the debut of International Consolidated Airlines Group following the merger of British Airways and Iberia. Shares fell 3.1p from their opening price to 285p, although this was more than 1% higher than the pair's joint valuation on Thursday, when BA called time on nearly 24 years of trading under its own name.
The stock received an early boost as broker UBS initiated coverage on the new stock with a buy rating and a price target of 360p.
Outside the top flight, shares in bank note printer De La Rue plunged 15% after French takeover suitor Oberthur abandoned plans to acquire the firm following the rejection of its latest approach worth £926m (€1.08bn). Shares closed 124.5p lower at 695p.
Attention was also focused on the food production sector after deals involving pizza and biscuits firm Northern Foods and Hovis maker Premier Foods.
Premier's shares were down 0.6p at 21.8p after selling its Quorn and Cauldron meat-free business to a private equity consortium for £205m (€240.1m).
But Northern Foods shares jumped 11p to 74p after it agreed a £342m (€400.5m) takeover by the owner of Harry Ramsden's restaurants.
The deal on Friday night trumped a previously-agreed merger with Ireland's Greencore, which is now said to be considering whether to sweeten its offer for Northern.
The biggest Footsie risers were British American Tobacco up 90.5p to 2373p, Whitbread ahead 53p to 1773p, Rio Tinto up 104.5p to 4347.5p and Johnson Matthey up 46p to 1931p.
The biggest Footsie fallers were Lloyds Banking Group down 2.3p to 65.1p, Invensys off 9.6p to 325.4p, Weir Group down 41p to 1612p and Royal Bank of Scotland down 0.9p to 44.1p.
