Market Report: Royal Bank of Scotland sent higher by bullish talk

George Osborne may want to hold off taking Stephen Hester's advice any time soon. The Royal Bank of Scotland (RBS) boss was piling the pressure on the Government earlier in the week to start selling down its stake in the bank, but yesterday the group closed near the top of the Footsie on claims the next year or two will see its share price soar.

RBS climbed 1.67p to 28.14p after UBS announced it was time to snap up shares, arguing it could "move substantially higher" over the next 12 to 24 months. The reason for the change in advice, said the broker's analysts, was a growing confidence over the state of the UK's economy, with UBS now expecting GDP to rise 0.6 per cent this year instead of dropping 0.1 per cent.

"We see RBS as a clear recovery play on the UK and US," said the scribes, adding it was "one of the few European banks that has articulated a strategy that can deliver satisfactory returns for shareholders irrespective of prevailing market conditions".

The group was given another helping hand by Investec, which also changed its recommendation to "buy". The broker warned that although 2012 was likely to be RBS's fifth straight year of losses, "patience will ultimately be rewarded" – another message to Mr Osborne?

The upgrade by UBS to its GDP forecast was not the only bullish prediction being made in the Square Mile yesterday, with Citigroup being particularly eye-catching by arguing the FTSE 100 could double over the next decade. Pointing out that, despite the considerable amount of miserable economic news around, total returns from the benchmark index have recently touched all-time highs, they asked what "could happen if things actually get better?"

Back in the present, however, the Footsie continued to struggle to get above the 6,000 point level, although its rise of 24.86 points to 5,965.58 was enough for it to set a new, eight-month high. It brought to an end a week in which – despite trading desks being rather quiet, thanks in no small part to the Cheltenham Festival – the top-tier index managed to add almost 80 points.

Pole position was taken by Essar Energy on its last session as a blue-chip stock as it gushed up 11.3p to 124.9p. After the bell the group – along with fellow oil firm Cairn Energy (up 1.7p to 333.1p) – was relegated to the FTSE 250 as part of the latest indices reshuffle, with Aberdeen Asset Management (down 0.8p to 253.4p) and Croda International (up 13p to 2,238p) moving the other way.

Concerns over the repercussions if GKN – which slipped 2.4p to 217.2p – snaps up Volvo's aircraft business were continuing to grow. The engineer is reported to be in pole position in the race for the business, but with a potential price being mentioned of roughly £800m, Credit Suisse's analysts suggested it could have to raise £300m through either a placing or a rights issue.

The wooden spoon was taken by Polymetal International, with the Russian gold digger sliding 33.5p to 961.5p amid continuing vague speculation it could merge with Polyus Gold, despite the tale being denied back in January.

Back on the leaderboard, Tullow Oil spurted up 57p to 1,528p after the explorer announced that its Enyenra-4A appraisal well off the shore of Ghana had struck black gold.

Meanwhile, Downton Abbey-broadcaster ITV was lifted 2.25p to 89.93p on reports that next Wednesday's budget will include a tax break designed to make it more attractive for big-budget television dramas to be filmed in the UK.

As the latest iPad went on sale, Apple-supplier Imagination Technologies finished near the mid-tier index's summit. The chip designer charged up 61.5p to 701p after Goldman Sachs said the group's earnings growth potential was the highest of all the European tech companies it covered.

The iPad launch was cited as a reason behind Dixons ticking up 1.03p to 17p, completing a week in which its share price has gained almost a fifth.

Traders said the electronics chain was also being helped by the woes of its high street rivals such as Game (which slumped 11.01 per cent to 3.07) and Comet, with Dixons increasingly being seen as the last man standing.

It was a good session for the retailers in general, with online grocer Ocado flying up 10.66 per cent to 131.8p, while SuperGroup was pushed 27.5p higher to 627.5p after Panmure Gordon's Jean Roche said its inescapable SuperDry brand "possesses longevity".

On the small-cap index, Thomas Cook flew up 1.25p to 24p as punters responded positively to reports claiming the troubled tour operator has snubbed a £400m rescue package.

Elsewhere, Max Petroleum advanced 7.84 per cent to 13.75p on AIM after the Kazakh government gave approval for the explorer to start selling oil from its Zhana Makat field.