Banks and miners lift FTSE to four-month high

Mining stocks and banks lifted the UK's blue chip index to a new four-month high as impressive Chinese industrial production figures added to the cheer from the Basel banking settlement.

The FTSE 100 added 43.4 points to 5545.6 and the mid-cap FTSE 250 was 0.4 points higher at 10448.7.

Joshua Raymond, market strategist at City Index, said: 'It is the relatively good news from the Basel III ruling and bullish Chinese data that has lifted European markets today, triggering heavy gains in the heavyweight banking and mining sectors.'

On Friday, the Dow Jones Industrial Average closed 47.53 points higher at 10,463.

The pound was also higher, up one cent at $1.547 as the good news meant some investors sold safe-haven dollars. Against the euro the pound was down 0.35% at €1.2064 after the European Union lifted its eurozone economic growth forecast to 1.7% from 0.9%‏.

Prudential was lifted by talk in the Sunday Times that a Chinese consortium is considering making a bid for the insurance group.

Industrial production grew by 13.9% in China ahead of consensus forecasts that the pace of growth would slow again following the slowdown to 13.4% in July. That has helped to reassure investors that Chinese demand will remain robust even as global growth slows from recent highs.

The news lifted Xstrata 32p to £11.67 and Kazakhmys 25p to £13.20.

New rules on how much capital banks need to hold were cheered with Lloyds up 2.05p at 77.67p and RBS shares up 1.12p at 49.65p leading the pack

There is increasing talk that Lloyds will be able to start paying some cash back to shareholders, given the low bar set by the new rules and that its capital reserves are already much higher than required.

But AB Foods was left out in the cold after news of a slowdown at its cheap clothing group Primark. The group said sales had slowed in the second half of the year and warned that margins in the business would be lower next year.

Given profits and margins were much higher this year few see that as a reason for concern but most agree the strong performance in the shares mean it is now time for a pause for breath.

Panmure Gordon analyst Graham Jones has downgraded his view of the shares to 'hold' from 'buy', pointing out the shares have risen by an impressive 32% versus a flat market so far this year. Shares fell 31p to £10.57.