Market Report: 'Santa rally' gives Footsie a boost on retail optimism

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"It's a Santa Rally," cried City traders. The FTSE 100 shot up more than 1 per cent, rising 59.37 points to 5566.77, on its last full day of trading before the year-end. The few equity traders at their desks this week have been doggedly seeking positive news but for much of yesterday the market remained depressingly lacklustre. Volumes were less than 3 per cent of the 90-day daily average, which gives an indication of just how quiet it was.

But tentative signs of optimism on UK high streets and some positive news on American housing drove the Footsie strongly upwards in the final hour or so of trading. By the end of the day all but half a dozen of the top 100 stocks were flashing blue, indicating they were up on the day.

The market closes early at lunchtime today ahead of New Year's Eve so, barring any unexpected shock this morning, the Footsie is likely to end the year down less than 6 per cent, having ended 2010 at exactly 5900.

Growing talk of a mini-revival on the high street was fuelled by the property firm Hammerson, owner of the Brent Cross shopping centre in north London and the Bullring in Birmingham, which reported a 6 per cent rise in footfall in the first three days of the sales. Shares rose 4.7p to 356.6p.

Next also climbed 49p to 2709.6p as investors are hopeful Lord Wolfson's clothing group will have good news when it is the first of the big retailers to update the market about trading on 4 January. Next has been one of the Footsie's star performers, rising 34 per cent this year. Analysts at Seymour Pierce have pencilled in 4.1 per cent growth at Next's 520 stores in the three months to 24 December — admittedly against weak comparatives since last December was ruined by heavy snow. But the Next Directory, its catalogue and online business, should also be up 9.3 per cent.

On the FTSE-250, Supergroup, the retailer behind fashion label Superdry, had another rollercoaster day. After dropping more than 8 per cent on Wednesday, the notoriously volatile shares recovered some of that ground, to rise 8.1p to 494.8p.

The eurozone continues to dominate sentiment. Most of the big UK banks rose yesterday following this week's series of Italian debt auctions, which went off largely successfully — despite a 10-year Italian bond selling at a pricey interest rate of 6.98 per cent.

Lloyds Banking Group rose 0.47p to 25.48p, Royal Bank of Scotland was up 0.26p at 20.11p and Barclays, which had slipped at the start of the day, recovered to rise 2.3p to 174.5p.

Evraz, the FTSE-100 Russian steel and mining business linked to Chelsea owner Roman Abramovich, had looked like being a big loser for the second day running as it dropped another 10p but it clawed back losses during the day to finish down 0.6p at 372.7p. Investors hope the worst may be over after an earthquake in Siberia, which meant the group had to cut back on mining activities in the region.

Also falling for a second consecutive day was Betfair, down 21.5p at 760p. The online betting exchange, which lets punters bet against each other, suffered a minor public relations disaster after it voided all bets on a race at Leopardstown's Christmas meeting. Betfair had mistakenly offered odds of 28-1 because of a computer error. Cue angry tabloid headlines about Betfair punters being denied a payout of £23m.

Other gambling firms fared better, notably 888 Holdings, up 2.8p to 42p, as analysts reckon it should benefit from the possible relaxation of US online gaming laws by the Department of Justice. The company said it should be a "major beneficiary" and broker Panmure Gordon even felt moved to put out an analyst's note — a rare move between Christmas and New Year — which raised its target price for 888 Holdings to 63p.

Fellow online gaming firm BWin Party, which surged more than 20 per cent on Wednesday after the DoJ's news, held on to some of those gains, slipping only 1p to 159p.

Shares in AIM-listed Yorkshire bus group Optare slumped nearly a third at one point after Scottish rival Alexander Dennis said it had broken off takeover talks. Optare, which evenutally finished down 0.03p or 5 per cent at 0.58p, now depends on key shareholder Ashok Leyland, part of India's Hinduja Group, to ensure its future.

On a sporting note, Arsenal fans are on tenterhooks about the prospect of former star striker Thierry Henry rejoining the club. Arsenal shares held steady at £14,000 a pop but the emotional impact of Henry's possible return should not be underestimated. The 125-year-old club badly needs some va-va-voom on the pitch. However, investors have little to complain about, with shares up 27 per cent on the year. North London rivals Tottenham Hotspur rose 0.3p to 39.5p, as the club has enjoyed a strong run in the Premiership, taking third spot. But Spurs shares are down 38 per cent this year.