Banks lift the Footsie

BIG BANKS are supposed to support industries and markets in trouble, but they did it at an unlikely moment yesterday. While investors were consumed with worry about corporate book-keeping, sparked off by the Enron collapse and Allied Irish Banks' shock trading loss of £530m, a spirited bounce in bank shares hoisted the

Allied led the charge. It recovered from its near-20% fall on Wednesday to gain 0.61 euros (38 1/2p) to 12 euros (739p), helped by speculation of a rescue bid involving Royal Bank or Bank of Ireland and 'buy' recommendations from three big brokers.

Deutsche Bank, Morgan Stanley and Goldman Sachs united to highlight Allied shares as 'a buying opportunity'. Deutsche said there are signs the underlying position of the bank will look much better when it announces annual figures shortly, while Morgan sees 'little impact' on short-term profits.

But Allied was not alone. Standard Bank were also wanted, rising 13 1/2p to 749p after Commerzbank upgraded its shares from 'reduce' to 'hold'. It pointed out that they have been sold down on poor results from Asia and the negatives are now in the price, but bid hopes are not.

Other banks joined the rally. Despite its sizeable treasury operation, Abbey Nationaladded 28p to 1060p and Northern Rock 3 1/2p to 682 1/2p as buyers rushed for 'safer' mortgage banks. But they were well paced by mainstream banks, with HSBC adding 9 1/2p to 779p, Lloyds TSB 25 1/2p to 752p, Royal Bank of Scotland 16p to 1773p and Barclays 8p to 2147p. Analysts pointed out bank shares have been oversold this week and the main banking season starts next week with Barclays' annual results on Thursday.

Also helping market sentiment was a brighter opening on Wall Street and a run of good news from blue chip companies. BT jumped 11 1/2p to 238 1/2p after better-than-expected quarterly earnings and a £2.9bn fall in debt, which brought a 'buy' recommendation from WestLB Panmure.

Vodafone was the day's most heavily traded stock with a turnover of 275m shares as it promised to seek technology to make mobile phones harder to steal. Its shares rallied from recent weakness with a rise of 7 3/4p to 144 1/4p.

ICI continued to recover from last week's £800m rights issue shock and added 13 1/4p to 351p. Its shares have recovered 50p since it first unveiled the cash call. Insurer Royal & Sun Alliance, under pressure on rights issue, asbestos claims and dividend worries, rallied 18p to 320p. Invensys added 6 1/2p to 108p, but faces a stern test today after Moodies cut its credit rating last night, highlighting its ' substantial refinancing needs in 2002'.

Hedge-fund manager Man Group was the biggest faller in the Footsie, losing 35p to 1085p on a downgrading from Dresdner Kleinwort, which warned of poor fund performance in January, though it kept its 'buy' recommendation with a target price of 1442p.

Among high-tech shares, London Bridge Software gained 5 1/2p to 155 1/2p after reporting a 21% leap in yearly profits at £11.2m. CMG jumped 17 1/4p to 249p on winning a multi-messaging contract from Hutchison, holder of the UK's largest 3G mobile phone licence.

Profit warnings continued to put pressure on smaller cap companies. ICM Computer slumped 43p to 207p after warning that first-half trading has been hit by a downturn in spending on equipment by small companies. But Sportingbet, the world's biggest online gambling operator, recovered another 8p to 123 1/2p on its denial that it faces legal action in New Jersey.

Housebuilders were encouraged by news that the average house price has topped £100,000 for the first time. Wimpey rose 2 1/2p to 238 1/4p, Countryside 6 1/2p to 187p and Crest Nicholson 7 1/2p to 229 1/2p. Tullow Oil rose 4 1/2p to 94p with 25m shares traded. Word from the market is that broker Investec has placed Enterprise Oil's 3.3% stake in the Irish exploration firm.

The pound closed at $1.4103 and 0.6158 euros.

AIM-listed InterClubNet, the world's biggest provider of technology and information in sport, serving football, cricket, tennis and chess clubs, looks a good speculation. Valued at just £20m, with the shares down from 128p to 79 1/2p over the past year, it looks set for its first-ever profit of £1m this year. SQC Research forecasts 2002-3 profits of £3m, which puts its shares on a forward p/e of 7.