Heavyweight commodity shares and defensive drug-makers helped lift Britain's top share index yesterday, the last full session of 2008, although it stayed on course to post the largest annual drop since its 1984 launch.
The FTSE 100 closed up 73.33 points, or 1.7 per cent, at 4,392.68, building on the previous session's 2.4 per cent rise. However, activity was light, with just over 427 million shares changing hands, lower than Monday's 441 million and last week's daily average of 511 million.
The index has so far fallen 32 per cent, on track to record its biggest annual drop in its history when the markets close at 1230 GMT today.
Banks, which have been at the centre of the financial storm that is threatening to drag the global economy into a deep recession, were generally firmer as index heavyweight HSBC rose 2.2 per cent.
HBOS, however, shed 2.3 per cent after the Financial Times said HBOS's pension scheme trustees may ask a judge to postpone Lloyds TSB's proposed takeover of the lender until "appropriate arrangements" have been made to guarantee the merged business will stand behind the fund. HBOS said the merger with Lloyds, whose shares were down 1.2 per cent, offered the best form of protection for its employees.
Royal Bank of Scotland also fell.
The pound hit a record trade-weighted low as worries about a deteriorating UK economy pushed the currency to a six-and-a-half-year low against the dollar and close to a record trough versus the euro.
"With valuations looking as they are at the moment, 2009 could be an opportunity to pick up cheap stocks with a five-year view," said Angus Campbell, head of sales at Capital Spreads.
"But there are people who are in the minority at the moment who think stocks could get cheaper. After all the macro economic outlook for next year is pretty dire... The question is have equities priced in the bad news that is going to come next year."
Oil producers contributed the most points to the index, with BP, Royal Dutch Shell, BG Group and Tullow Oil up between 1.1 and 3.7 per cent.
Miners also firmed, with BHP Billiton, Eurasian Natural Resources, Anglo American, Xstrata, Vedanta Resources and Antofagasta gaining 1.1 to five per cent.