Market Report: FTSE 100 shows resilience as US stocks flag

The global stock market rally showed ominous signs of flagging yesterday, despite the United States following Europe's footsteps and pumping a lifeblood of new cash into the nation's banks.

But early jubilation at the $250bn (£143bn) injection ordered by President Bush proved short-lived on Wall Street as massive early gains of 406 points – on top of the 936 points overnight rise – were wiped out. The Dow Jones industrial average closed 76.6 points – 0.8 per cent – lower at 9,311.0.

But in London, the FTSE 100 proved more resilient, ending the day 137.3 points, or 3.2 per cent, ahead at 4,394.2, having been 277 ahead earlier in the session.

Throughout Europe it was much the same story, with markets ending well off their best levels as economists continue to warn that it is too soon to dismiss fears of a global recession, as rising unemployment will continue to dampen consumer demand despite any improvement in the health of the banks.

In the UK, unemployment figures due out this week are expected to show the biggest jump since 1992 – the 8th consecutive monthly rise. The loss of jobs in the banking and finance sector is likely to push the numbers higher in the coming months. "The jobs report is going to be bleak," said Alan Clarke, UK economist at BNP Paribas.

Barclays, which has declined the Government's multibillion pound handout, climbed to the top of the FTSE leaderboard with a 14 per cent rise at 246p, despite an odd report that Italian anti-trust authorities are to investigate its commercial lending practices.

But HBOS, the country's biggest mortgage lender, which plans to raise £8.5bn through offering new shares at 113.6p, fell 4.7p to 85.3p. Lloyds TSB, which is placing new shares at 173.3p, fell 10.7p to 151.3p, close to an all time low.

Royal Bank of Scotland moved up to 70p before retreating to finish 0.7p ahead at 65p, or 0.5p, below the price of its rights issue. One theory for the weakness in the price of bank shares is that big pension funds that own the stocks for their income are now being forced to sell as, under the terms of the government bailout, the banks will freeze payments for some time.

Centrica was 3.25p up at 290.25p on reports that it was talking to banks about arranging £3bn of debt to help it buy a 25 per cent stake in British Energy. The company has an option to buy the stake after BE's £12.5bn sale to the French group EDF goes through early next year. British Petroleum rose 28.5p to 446.75p after announcing a significant oil discovery at its Freedom Prospect in the deep water Gulf of Mexico. "This discovery further strengthens BP's resources base and portfolio of potential development projects in the Gulf," said the company.

ITV nudged 1p higher to 39.5p despite a worrying report that prices charged for advertising slots have fallen to a 15-year low. According to Billetts Media Monitoring, companies are spending less on advertising on the box because their own promotional budgets are coming under pressure.

Land Securities rose 59p to 1,157p on reports it is to sell its Trillium outsourcing arm to the family-owned firm Telereal following the collapse of £900m talks with a Middle East consortium. The government-backed takeover of our major banks is also raising doubts within the property world about the refinancing plans of a number of major companies. About £100bn of property loans are due for refinancing by the end of 2010. The broker Société Générale remains cautious about the prospect for the sector and sees prices coming off in the final three months of the year, although it has raised its rating on Liberty International, up 43p at 853p, and Hammerson, up 62p at 864p, from sell to hold.

Builders merchants Wolseley, which has taken a hammering because of the downturn in the UK and US housing market, bounced back 13.5p to 375.5p after broker Numis said it had been impressed by management action in tackling the crisis, although it warned that "risks are still evident". However, it has raised its target price from 240p to 428p. The shares have lost 60 per cent of their value in a year.

Cairn Energy, down 49 per cent in the past month, finished 2p easier at 1,734p as Evolution Securities said there was a strong case for buying the shares.

Spending by town halls and housing associations on maintaining and improving their housing stock has been unaffected, which is good news for firms such as Connaught and Mears. Connaught unveiled profits up from £11m to £15.2m with a pipeline of work worth £3.6bn. Connaught, 27p up at 385p, aims to double its market share of social housing maintenance services to 10 per cent within five years, triggering a 31p jump to 389p in the shares. Rival Mears, whose own order book at the half year in August stood at £1.7bn, gained 8p to 263.5p. Citigroup has a target price of 390p.