The FTSE 100 hit a two-and-a-half-month high on Monday ahead of the eagerly anticipated US jobs report as markets managed to offset some heavy falls from heavyweight bank RBS.
The UK lender dropped nearly 5% today after Chancellor George Osborne was quoted as saying that a decision over a 'good bank-bad bank' split will come within a few weeks.
London's benchmark index managed to close in positive territory for the eight consecutive day, finishing 31.62 points higher at 6,654.2 today. The FTSE 100 has not closed above this level since August 1st when it finished the session at 6,681.98.
As a backlog of US data begins to unwind following the US government shutdown, all eyes will be on delayed release of the September jobs report on Tuesday afternoon. However, the fact that the data is now two weeks old means that it will likely carry less weight than usual.
Nevertheless, consensus forecasts are pointing to a 180,000 increase in US non-farm payrolls last month, higher than the 169,000 gain seen in August, while the unemployment rate is expected to have remained unchanged at 7.3%.
Markets are hoping that the prolonged shutdown could prompt the Federal Reserve to put off tapering its stimulus programme until next year, given that the closure is likely to have weighed on growth in the fourth quarter.
Matt Basi, Head of UK Sales Trading at CMC Markets, said: "All but the most hawkish commentators have almost entirely priced out any prospect of Fed tapering in 2013, taking the edge off US data announcements to an extent."
Defence stocks rise, RBS sinks
QinetiQ, the defence technology and security firm, was a high riser on weekend reports that it is putting its US division up for sale. The Sunday Times reported that QinetiQ sent sale documents to potential suitors last week.
Meanwhile, aerospace and defence engineer Senior edged higher after strong order books at Airbus and Boeing helped it keep profits on track since early July.
BAE Systems and Rolls-Royce were making gains after analysts at Citigroup said that they have a "positive outlook" on civil aerospace due to a ramp-up of new aircraft production and rising production of legacy aircraft.
While the bank said it is still cautious on the wider defence sector, it said that the recent debt-ceiling deal has "removed some immediate risks overhanging US defence". This helped boost the share prices
of Babcock and Smiths Group.
Leading the downside was part-nationalised lender RBS. Nomura kept its 'reduce' rating for the stock today, saying it believes minority shareholders have "much to lose" from an unfavourable outcome of the 'good bank-bad bank' review. However, Shore Capital said it understood that any break-up may need approval from minority investors, giving them the chance to block anything that damages their interests.
Banking peer Barclays was also lower today, though HSBC, Standard Chartered and Lloyds all finished higher.
London-based Charterhouse approached banks and its investors over financing a possible £1bn deal to buy G4S' cash-solutions business unit, according to a report on Bloomberg today, sending the stock sharply higher by the close.
FTSE 100 - Risers
Amec (AMEC) 1,148.00p +3.99%
G4S (GFS) 250.50p +3.51%
Vedanta Resources (VED) 1,071.00p +3.08%
Babcock International Group (BAB) 1,242.00p +2.90%
Rolls-Royce Holdings (RR.) 1,123.00p +2.84%
ARM Holdings (ARM) 1,039.00p +2.47%
Rexam (REX) 504.00p +2.38%
Smiths Group (SMIN) 1,433.00p +2.21%
Capita (CPI) 981.00p +2.08%
BAE Systems (BA.) 453.90p +2.02%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 353.10p -5.26%
GKN (GKN) 362.50p -2.21%
Kingfisher (KGF) 377.50p -2.00%
Marks & Spencer Group (MKS) 487.10p -1.62%
Prudential (PRU) 1,247.00p -1.34%
IMI (IMI) 1,517.00p -1.30%
Barclays (BARC) 274.75p -1.12%
Fresnillo (FRES) 978.00p -1.06%
Antofagasta (ANTO) 891.00p -0.89%
Shire Plc (SHP) 2,515.00p -0.87%
FTSE 250 - Risers
QinetiQ Group (QQ.) 202.80p +4.59%
KCOM Group (KCOM) 100.70p +4.03%
Centamin (DI) (CEY) 53.25p +4.00%
Provident Financial (PFG) 1,638.00p +3.93%
Supergroup (SGP) 1,109.00p +3.74%
NMC Health (NMC) 350.00p +3.46%
Serco Group (SRP) 546.00p +3.31%
Rank Group (RNK) 155.50p +3.25%
Premier Farnell (PFL) 230.00p +3.19%
AL Noor Hospitals Group (ANH) 866.00p +3.16%
FTSE 250 - Fallers
Kenmare Resources (KMR) 22.25p -3.26%
Entertainment One Limited (ETO) 243.10p -2.37%
Ocado Group (OCDO) 445.50p -2.04%
Devro (DVO) 308.10p -1.94%
Britvic (BVIC) 599.50p -1.40%
Domino's Pizza Group (DOM) 603.00p -1.39%
Hochschild Mining (HOC) 163.90p -1.27%
PayPoint (PAY) 1,054.00p -1.22%
Dialight (DIA) 1,194.00p -1.08%
Wetherspoon (J.D.) (JDW) 745.50p -1.06%