The Footsie gained 85.69 points to close at 4377.34 after sentiment was helped by in-line economic data in the United States.

Friday's gains marked the fourth day of rises in a row, although the rally failed to prevent the index's third worst October ever.

BT lost nearly a fifth of its value after the telecoms company issued a profits warning at its Global Services division and ruled out an increase in its half-year dividend, causing shares to slide 27p to 1151/2p. Fellow communications firm Cable & Wireless was caught in the BT sell-off and dropped 11/4p to 1227/8p.

Barclays shares initially jumped 10 per cent after it said the billionaire Abu Dhabi sheikh who bought football club Manchester City two months ago was set to pump up to £5bn into
the business.

The move will enable Barclays to avoid calling on taxpayer funds to strengthen finances weakened by the credit crunch.

But shares remained volatile and were later off 263/8p to 1787/8p as a result of fears about the cost of the financing terms.

The rest of the sector struggled for direction, with Lloyds TSB up 1/4p at 1973/4p. HBoS shares rose 51/4p to 991/4p, after its planned merger with Lloyds received the all-clear from Business Secretary Peter Mandelson, who ruled that the public interest benefit outweighed competition concerns.

Meanwhile, BSkyB was another stock to fluctuate, even though it topped City expectations by revealing it added 87,000 new customers in the three months to September 30.

Shares opened 3 per cent higher but were later 1/2p up at 3781/2p. Centrica shares were down 13/4p to 3041/2p after the British Gas firm announced a £2.2bn rights issue to pay for the potential acquisition of a 25 per cent stake in British Energy.

Friends Provident was enjoying better fortunes after the insurer posted a 14 per cent drop in new business sales but said it had no need to raise extra capital.

Shares were 31/4p higher at 70p, despite dropping plans to sell wealth management unit
Lombard.

Retailers were under pressure after department store chain John Lewis reported a 9.8 per cent drop in sales for last week. Next and Marks & Spencer will present trading updates next week and were down 40p to 1054p and 111/2p to 219p respectively.

Primark owner Associated British Foods is also due to report figures next week, but the stock gained 311/2p to stand at 6951/2p during a strong session for food suppliers.

Encouraged by a healthy trading update on Thursday, Unilever rose 60p to 1396p and rival Reckitt Benckiser cheered 128p to 2610p.

The biggest Footsie risers were Standard Life up 253/4p to 2383/4p, Tullow Oil ahead 51p to 524p, Xstrata lifted 95p to 1055p and Vedanta Resources advanced 741/2p to 850p.

The biggest Footsie fallers were BT, Old Mutual off 97/8p to 501/8p, Carnival slipped 214p to 1355p and Barclays.