BRITAIN'S leading share index gained 0.4 per cent yesterday, adding to its post-Christmas rally, with Vodafone in demand, and oil stocks firmer, outweighing a fall in defensive pharmaceutical and tobacco shares.
The FTSE 100 ended 17.85 points hig
her at 4,579.64, its highest close in two months, after rising 8.2 per cent in a four-session winning run last week.
The UK benchmark last year suffered its biggest drop since its launch in 1984, falling 31 per cent over the year.
Index heavyweight Vodafone provided the biggest boost for the FTSE 100 yesterday, up 4.4 per cent, extending its recent strong run to reach its highest since September after Credit Suisse tagged the mobile phone group a "trading buy" on 31 December.
Peter Dixon, UK economist at Commerzbank, said: "The gut feeling is that maybe markets were overdoing the gloom towards the end of last year.
"They are testing the upside a little to see if there's any substance to whether stocks were oversold, but there's lots of scepticism, which I share, about whether (the rally] is sustainable."
The fifth straight day of gains came despite construction activity data showing the sector to have hit a new record low, adding to the mounting gloom for the economic outlook.
Two more administrations – china and crystal group Waterford Wedgwood and retail chain Passion for Perfume – also suggested UK corporates were starting 2009 on the back foot.
But a lower-than-expected fall in US construction spending provided some cheer for the London market.
Retailers were in the spotlight as investors prepare for two weeks of updates from the high street's biggest names.
Marks & Spencer rose 9p to 230p despite fears over a possible worst-ever Christmas for the chain. M&S and a number of other retail stocks were on the front foot after City brokers including Panmure Gordon suggested that the fall-out from depressed Christmas trading conditions was now factored into share prices.
Department store business John Lewis also said it was "encouraged" by trading despite flat like-for-like sales in the five weeks to 3 January, while figures from Experian showed the number of people out looking for bargains on Friday, Saturday and Sunday was up 2.7 per cent on the same period in 2008.
Argos owner Home Retail Group cheered 3p to 213.5p, but Next – due to give a trading update today – lost an initial gain to stand 18p lower at 1,091p.
Bank shares were under pressure after Deutsche Bank cut price targets on various stocks. HBOS shed 6.7p to 65.8p, Lloyds TSB dropped 4.3p to 125.7p and HSBC was 3p lower at 679p.
Garfunkel's owner Restaurant Group had a rollercoaster session. Its shares were up 1.5p at 107p after it said it was on track to meet full-year forecasts, despite a slide earlier as investors focused on declining sales trends.
