HBoS shares surge

HBOS staged a dramatic bounce-back on the London stock market today as the group shrugged off last week's funding crisis rumours.

Britain's biggest lender saw shares surge more than 14% ahead, with investor confidence returning after an overnight rally on Wall Street eased concerns over the global credit crisis.

HBOS saw shares plummet as much as 20% at one stage last week as speculation ran rife over the firm, prompting City watchdogs to launch an inquiry amid accusations that traders were profiting from spreading false rumours.

But news that JP Morgan had upped its offer for troubled US investment bank Bear Stearns helped America's Dow Jones Industrial Average soar ahead yesterday.

And the FTSE 100 Index followed its lead today with a rise of more than 3% as trading kicked off after the long Easter weekend.

HBOS led a rebound among banks following the Bear Stearns bid increase, which suggested that the bank – and wider sector – was not in as bad a state as first feared.

News over the weekend that around 250 directors and senior staff at HBOS had snapped up more than £6 million of the bank's shares the day after the share price collapse also added to the stock's recovery.

Barclays followed HBOS with a 9% hike, with NatWest parent Royal Bank of Scotland and mortgage group Alliance & Leicester also up, by 8% and 7% respectively.

Firms with significant US operations also fared well, such as plumbing materials company Wolseley, which was 9% ahead today.

Market experts said the mood on the London market would continue to be dictated by the US.

Martin Slaney, at GFT Global Markets, said: "Today is all about Bear Sterns.

"While the major European markets enjoyed a four-day break, US markets were open yesterday, and the improved price tag from JP Morgan has provided major upside to American and Asian shares and sets a positive lead for us."

JP Morgan hiked its bid five-fold for Bear Stearns Investment yesterday in a bid to appease the shareholders of the stricken investment bank.

The new offer – now valuing the credit crunch victim at around 1.2 billion US dollars (£606 million) – came after Bear Stearns ran into a cash crisis and was forced to turn to the US Federal Reserve for emergency funding.

The funding rescue and cut-price sale of Wall Street's fifth-biggest investment bank sparked a global share sell-off last week.

The Footsie fell 2.5% in total over a highly volatile four days of trading, which saw central banks worldwide pump money into credit markets to ease a new twist in the crunch.

The US also slashed interest rates by three-quarters of a percentage point to stave off recession.

But hopes were raised over America's flagging economy yesterday as new homes data showed a surprise rise in house sales.

All eyes will also be on economic data and results out in America later today, with consumer confidence figures due out, which will be scrutinised for signs of further positive news on the world's biggest economy.