London back in black as US gains provide late direction

Fresh worries over Europe's sovereign debt crisis had threatened to put the brakes on the recent progress seen on both sides of the Atlantic.

However, an improved start to trading in America helped the FTSE 100 Index to recover Tuesday's lost ground as it closed 21.92 points higher at 5429.74.

The news that Portugal managed to raise one billion euros in a debt auction yesterday that drew strong investor interest helped ease some of the concerns.

The successful debt offering helped market sentiment in the US, along with news from Ireland's finance ministry that nationalised lender Anglo Irish Bank would be split to wind down its assets. The euro recovered against the dollar and yen following the news.

"Overall we're still locked in a fairly narrow trading range, and that's consistent with the jerky pattern of how the economy here and in developing worlds is unfolding," said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

Gold rose for a third day to verge on another record high and silver hit a two-and-a-half- year peak.

Gold has risen by about 15 per cent so far in 2010, marking ten years of continuous increases, and looks set for its third all-time high this year. It last hit a record $1,264.90 in June.

As well as London's decent shares performance, the pound strengthened against the dollar and euro after the latest manufacturing output figures offered a picture of a sector that was just about holding its own in uncertain conditions.

Sterling rose nearly 1 per cent to 1.55 dollars and 1.22 euros.

Despite the wider market recovery, banks continued to struggle as investors remained cautious in the wake of a report that suggested Europe's major players held more risky government debt than thought during recent stress tests.

Amid a dramatic week for the sector, Barclays dropped 2 per cent, or 6p to 308p, as Bob Diamond's promotion to replace John Varley as chief executive continued to draw an uncertain reaction from investors.

HSBC, which is due to lose Stephen Green as executive chairman later this year, fell 75/8p to 6543/4p, while Royal Bank of Scotland was off 1/4p to 457/8p.

A fall in commodity prices, including the benchmark price of crude oil, put pressure on a number of commodity-based stocks. Among them, Vedanta Resources fell 8p to 1972p and BHP Billiton eased 21/2p to close at 1890p.

On the risers' board, chip designer Arm Holdings jumped 6 per cent after broker UBS issued a downbeat assessment of the European semiconductor market, but made an exception for the Cambridge-based firm as it raised its price target.

Shares were 213/8p better off at 3873/4p.

It was followed on the way up by oil giant BP as shares overcame the fall in crude prices to post a 53/8p improvement to 4121/8p. This came after ratings agency Fitch upgraded BP's debt from its lowest investment grade BBB, up to A.

Fitch said the upgrade "primarily reflects an end to the threat of further leaks from the Macondo well in the Gulf of Mexico".

BP also released a report into the spill in which it said a series of complex events, rather than a single mistake or failure, led to the tragedy.

Elsewhere on the fallers' board, engineering firm Invensys lost some of the froth in its shares as takeover speculation started to fade.

The stock bounced 7 per cent on Tuesday on bid rumours, but was down 21/4p to 2667/8p yesterday.

The biggest Footsie risers were Arm Holdings, Icap ahead 143/4p to 4341/8p, Inmarsat up 221/2p to 712p and Admiral Group ahead 49p to 1620p.