Footsie buoyed by firmer prices for mining and financial stocks

FTSE: 5,318.59 (+161.75) Mid-250: 10.321.33 (+250.16) Small Cap: 2,956.58 (+31.25):UK STOCKS advanced for a second day yesterday, with the FTSE 100 Index posting its biggest rally since May 2010, as banks and commodity companies rallied the most in a week.

The FTSE 100 rose 161.75, or 3.1 per cent in London, extending Wednesday’s 1.1 per cent advance. The gauge has climbed 6.2 per cent from this year’s lowest level on August 10th after a 16 per cent slump from the start of July dragged equities to their lowest price to earnings ratio since March 2009.

The gauge has fallen 13 per cent from this year’s high in February.

“We are not on the edge of Armageddon,” said Justin Urquhart Stewart, who helps oversee about $3.3 billion at 7 Investment Management in London.

“Areas of the world are still growing. We’re seeing a nice little relief rally,” he said.

The FTSE All-Share Index gained 3 per cent yesterday.

The Federal Reserve will release its Beige Book survey of US economic conditions after the close of European trading. President Barack Obama will address Congress on his plan to boost job growth.

In Germany, the top court rejected three constitutional challenges to the country’s participation in the euro rescue funds. The Federal Constitution Court dismissed lawsuits intended to block Germany’s share of a loans package for Greece and a separate fund approved last year to stop the sovereign-debt crisis from spreading.

Barclays, the UK’s second-largest bank by assets, surged 6.1 per cent to 159.95p, snapping a three-day sell-off.

Lloyds advanced 6.4 per cent to 32.73p and Royal Bank of Scotland soared 6.1 per cent to 22.46p.

A gauge of UK banks rose 4.2 per cent, paring this week’s drop. The cost of insuring against default on European sovereign debt and bank debt surged to a record earlier this week amid signs that European lenders may be struggling to get funding.

BHP Billiton, the world’s biggest mining company, jumped 4.8 per cent to 2,036p as base metals advanced in London.

Rio Tinto increased 4.2 per cent to 3,697p and Xstrata gained 5.4 per cent to 1,031p.

SuperGroup rallied 7 per cent to 1,059p after reporting a 66 per cent gain in first-quarter sales as it opened more stores in the UK and overseas. – (Bloomberg)