17.20 (close): Insurance stocks rose sharply today after a £2billion deal in the financial services sector helped the London market weather the economic gloom.
The transaction involved the Anglo South African firm Old Mutual, which closed 11 per cent or 12.7p higher at 123.7p after it announced plans to sell its Nordic long-term savings and banking arm to Sweden's Skandia Liv.
The deal activity was a factor in the FTSE 100 Index bouncing back from the heavy losses of the previous session to finish up 34.1 points at 5400.9.
There had been fears the top flight would slide further after ratings agency Fitch downgraded five major European banks, including Credite Agricole, and new research indicated China's factory output will shrink in December.
Concerns about the eurozone were eased slightly after a successful Spanish debt auction. Meanwhile, Italy's unelected premier Mario Monti will hold a confidence vote on the austerity measures in a bid to soothe worries about the debt-laden country's finances.
The developments meant the euro, which on Wednesday slumped below the 1.30 mark against the US dollar for the first time in 11 months, had a more resilient session today.
It was flat against most major currencies, with the pound worth 1.19 euros and just below 1.55 against the greenback after more gloomy updates from the UK retail and manufacturing sectors.
Other insurers to benefit from the impact of the Old Mutual deal included Standard Life, which lifted 4.7p to 198.1p, while Prudential cheered 14p to 614.5p and Legal & General added 2.65p to 101.5p.
Broadcaster ITV was another significant riser after regulator Ofcom said its study into the way TV advertising is bought and sold found no harm to consumers.
It ruled out a reference to the Competition Commission, prompting a relief rally for ITV's shares as they lifted 1.35p to 62.35p.
The worse than expected UK retail sales for November failed to dent confidence in retailers ahead of the key Christmas trading period. Next was up 18p at 2603p, while B&Q owner Kingfisher was 3p higher at 240.2p.
In corporate results, Sports Direct posted a 2 per cent rise in half-year earnings to £139.2million but with no half-year dividend shares fell 9.5p to 190p.
The slump, which reversed an initial 5 per cent rise for the retailer, came despite analysts praising the latest results performance.
In addition, the company announced new stretching targets that could see Newcastle United boss Mike Ashley receive six million of bonus shares.
Rival JD Sports Fashion was down 45.5p at 570p.
Suit specialist Moss Bros was 0.25p higher at 32.75p after maintaining its recent trading improvement with a 10.5 per cent rise in like-for-like sales.
The group, which recently sold its Cecil Gee and Hugo Boss stores in order to focus on improving its core Moss business, said it continued to make good progress despite the market conditions.
The biggest FTSE 100 Index risers were Old Mutual up 12.7p at 123.7p, Weir Group ahead 72p at 1940p, Hargreaves Lansdown up 13.5p at 434.9p and Investec ahead 9.5p at 338p.
The biggest fallers were Resolution down 5.2p at 245.7p, Cairn Energy off 4.3p at 264.6p, Tullow Oil down 12p at 1316p and BG Group off 11.5p at 1316.5p.
16.20: It's proving a volatile afternoon on the markets as eurozone worries take the shine off better-than-forecast U.S. economic data.
Non-eurozone members Hungary and Czech Republic are expressing doubts about the 'fiscal compact' agreed last week by the majority of EU countries - despite the UK wielding its veto.
The deal is intended to centralise fiscal policy, but the two countries are apparently worried about losing their tax independence.
The euro has slid back below the key $1.30 level.
The FTSE 100 has pared its gains and is trading 28.6 points higher at 5,395.4 as the end of the session approaches.
The Dow Jones is up 57.2 points at 11,880.7.
Michael Hewson of CMC Markets said stocks were off their highs as more countries 'poked holes' in the fiscal compact.
'Comments by Christine Lagarde, head of the IMF, also weighed on markets after she ramped up the rhetoric, warning of the dire consequences of inaction if countries outside the EU didn’t help with a solution to the crisis,' he said.
15.20: Wall Street has rebounded after new weekly jobless claims came in at the lowest level since May 2008.
The four-week moving average of new claims was also at its lowest since July 2008, signalling a recovery in the jobs market of the world's largest economy.
A better-than-expected reading from a key U.S. manufacturing gauge and upbeat quarterly results from economic bellwether FedEx also helped improve sentiment across the Atlantic.
The Dow Jones is off its opening highs but still 92.5 points ahead at 11,916 in early trading.
Meanwhile, the euro has edged back above the key $1.30 level after a successful Spanish bond auction.
The FTSE 100 is 57.9 points higher at 5,424.7.
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MARKET REPORT: Footsie puts the boot into miners
15.00:
Markets have now opened on Wall Street and the Dow Jones has opened strongly, 128.54 points higher at 11,952.02.
Back in London the FTSE 100 has marched even higher, now 55.32 points up at 5,422.12.
13.20:
Old Mutual's sale of its Nordic businesses is helping to keep the FTSE 100 in positive territory today despite hardening fears over the eurozone sovereign debt crisis.
We have more here on Old Mutual, which jumped 11.1p to 122.1p after it announced plans to sell its Nordic savings and banking operations to Skandia Liv.
This made it the top riser in London's blue chip shares index, which was 35.3 points higher at 5,402.11 at lunchtime.
Banks and miners were among the biggest risers after yesterday's heavy sell-offs. Royal Bank of Scotland rose 0.4p to 19.9p, Lloyds was up 0.4p at 24.5p, and Vedanta Resources was ahead 30p at 1095p.
Worse than expected UK retail sales for November failed to dent confidence in retailers ahead of the key Christmas trading period.
Next was up 15.5p at 2600.5p, Primark owner Associated British Foods was up 4.5p at 1090.5p, Tesco was ahead 2.2p at 388.6p and Sainsbury's rose 2.3p to 290.9p. However, Morrisons was down 0.8p at 316.2p, as it surrendered yesterday's gains when it was the sole riser in the top flight index.
Fears about the eurozone persisted despite a successful Spanish debt auction, and investors are now awaiting a confidence vote on the austerity programme put forward by Italy's unelected premier Mario Monti.
Mike McCudden, head of retail derivatives at Interactive Investor, commented: 'We have seen very low volumes across equities this week as savvy investors see buying Christmas presents as a safer play than investing in this market.
'Over in the Eurozone cracks are appearing in the Franco/German relationship as [Germany's Angela] Merkel plays to her local audience and not to the eurozone. Furthermore, christmas flowers germany 'A rating cut in christmas flowers germany blog Louise Cooper of BGC Partners said: 'The sell-off in the euro in the last week has been pretty dramatic, taking the currency to an 11-month low against the dollar.
'Despite such sharp falls, it is continuing lower today, trading below the key $1.30 level as recession fears increase and eurozone uncertainties persist. What has surprised many during this crisis, has been the strength of the euro, well no more...'
Futures trading points to a higher open on the Dow Jones later. But a raft of economic data is due out today - including wholesale inflation, producer prices, weekly jobless claims and industrial output figures - which could radically change investor sentiment across the Atlantic.
10.10:
The FTSE 100 is holding onto mild gains, up 9 points at 5,375.8, after a £2billion deal in the financial services sector sent Old Mutual to the top of the risers' board.
The Footsie giant jumped 10 per cent, up 10.95p to 121.95p, after it announced plans to sell its Nordic savings and banking operations to Skandia Liv.
There were fears the top flight index would open lower after Fitch downgraded five major European banks, including Credite Agricole, and new research indicated China's factory output would shrink in December.
'The fact that equity markets haven’t sold off further and that they are bouncing in early trade so far this morning comes as a bit of a surprise,' said Simon Denham of Capital Spreads.
'Despite all of the efforts being made by European leaders a possible break up of the eurozone is becoming more and more likely.
'Signs that people are preparing for such a break up are already being seen as money presses for individual currencies such as the Drachma and even Deutsche Mark are ready to go at a moment’s notice and the world’s biggest inter-dealer broker has been testing its execution systems for currency deals in the event of anyone exiting the eurozone.'
Manoj Ladwa of ETX Capital commented: 'Equities, gold and crude oil are all attracting interest as opportunistic traders pile in for a rebound.
'But the initial euphoria may be short-lived as Chinese and European manufacturing figures continue to show signs of contraction, further confirming the global economic weakness.'
In corporate results, Sports Direct continued its recent strong run by reporting a 2 per cent rise in half-year earnings to £139.2million.
While there was no half-year dividend, analysts were impressed with the performance in the current tough climate. Shares were 6.95p higher at 206.45p, a rise of 3%. Read more here.
The firm's rival JD Sports Fashion was up 17p at 632.5p.
In a rare upbeat session for the retail sector, suit specialist Moss Bros was 0.25p higher at 32.75p after maintaining its recent trading improvement with a 10.5% rise in like-for-like sales. Gross profits were 7.9% ahead of last year, it added.
However, retail sales fell 0.4 per cent in November after a 0.6 per cent rise in October, the Office for National Statistics has announced. Economists had predicted a 0.3 per cent decline.
'Sluggish sales occurred in November even though the evidence points to retailers engaging in increased discounting and promotions to try to encourage consumers to spend,' said Howard Archer of IHS Global Insight.
'It may be that a substantial number of consumers are delaying their Christmas purchases in the belief/hope that struggling retailers will increasingly engage in discounting and promotions as the Big Day draws ever nearer.
'Retailers certainly cannot rely on a late surge in consumer’s Christmas spending this year given the major squeeze on personal finances and very low confidence.'
8.40:
The FTSE 100 has opened 16,6 points higher at 5,383.4, although these modest gains could be limited by concerns about a worsening of the eurozone crisis and evidence that the powerhouse Chinese economy is stalling.
Continental markets, which suffered heavy losses yesterday, have also made up some lost ground this morning.
Germany's DAX is up 35.9 points at 5,711.1 while France's CAC 40 is ahead 29 points at 3,005.1 and Italy's MIB is 184.9 points higher at 14,615.
Preview: The FTSE 100 is seen opening down 6-9 points, extending yesterdays sharp falls as the sell-off continued on Wall Street and in Asia on fears the eurozone crisis could be worsening, and after some disappointing data from China.
The blue chip index closed down 123.35 points or 2.3 per cent at 5,366.80 yesterday - having rallied 1.2 per cent on Tuesday.
The losses were led by weakness in risk-sensitive commodity issues and banks as concerns over the eurozone debt crisis ratcheted up when Italy's borrowing costs rose to a record high.
Worries over a possible sovereign credit rating downgrade for France were also revived, knocking the country's hard-pressed banks.
After the close, France's Credit Agricole warned it would post a loss for 2011, and said it would write off €2.5billion worth of assets and cut 2,350 jobs in a cull of its investment banking operations.
And after the U.S. close, Fitch downgraded its credit ratings for five European banks, including Credit Agricole.
U.S. blue chips ended 1.1 per cent lower on Wednesday, at the level they were when London closed, having recovered a touch from heftier session lows.
In Asia , MSCI's broadest index of Asia Pacific shares outside Japan was down 2 per cent. Japan's Nikkei shed 1.6 per cent, weighed down by weaker-than-expected business sentiment as shown in the Bank of Japan's quarterly Tankan survey.
Hong Kong and Shanghai's benchmark indexes were among the biggest losers in Asia after the release of HSBC's China flash PMI, the latest piece of data to show the world's second largest economy losing steam.
The private sector survey indicated that China's factory output will shrink again in December, adding to the headwinds facing a global economy struggling with sluggish U.S. growth and the eurozone sliding back into recession.
'With concerns over global economic growth in the new year still very much front of mind it's difficult to see what might kick the bulls back into action, although as volumes inevitably start to thin out ahead of the Christmas break next week and with many stocks looking increasingly depressed, ideal conditions for something of a Santa rally may well be forming,' said Terry Pratt, Institutional Trader at IG Markets.
On the economic front, November retail sales will be released later, with a fall of -0.3 per cent forecast after a 0.6 per cent rise in October. This would give a year-on-year rise of 0.3 per cent after a 0.9 per cent increase in the previous month.
The CBI industrial trends-orders survey for December will also be released.
Stocks to watch today include:
Rio Tinto, BHP Billiton: The Daily Mail's market report notes revived talk that Rio and BHP could both be stalking Walter Energy, and cites analysts as saying the take-out price could be double the current $60 a share.
Barclays, Standard Chartered: Extra British regulations and taxes on banks will cost Barclays more than £1billion ($1.5 billion) and Standard Chartered over $500 million a year and are part of a flood of reforms that could backfire, the bosses of the two banks said.
London Stock Exchange: The London Stock Exchange is in talks with UK regulators on the possibility of establishing a trade repository, or electronic data storage warehouse, that would handle over-the-counter (OTC) derivatives, the Financial Times reported.
John Wood Group, Sports Direct, International Personal Finance, Keller Group, Moss Bros: Trading updates.
Hiwave Technologues, Pursuit Dynamics: Full-year results.
GCM Resources: The Bangladesh-focused coal miner holds its annual general meeting.
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