THE FTSE 100 staged a remarkable reversal in a two-day rally that saw it gain more than 225 points, cancelling hefty falls to rise 2.5% on Thursday and 1.7% in the final session.
But it was a dramatic end to the week, with the rally at one stage appearing to have ground to a halt, before better-than-expected results from US bank Citigroup saw it make a U-turn of some 130 points in the last few hours of Friday.
Relief over
JP Morgan's figures the previous day had begun the bounce back from banks, but much lower oil prices also boosted the Footsie, which closed the week up 114.5 points at 5376.4.
Banking stocks fought back from a bloodbath earlier in the week, with the lower than feared losses from JP Morgan and Citigroup easing fears over the American financial sector.
Barclays shares had hit a 10-year low at one point, with Royal Bank of Scotland also hammered as concerns grew that troubles at US mortgage giants Fannie Mae and Freddie Mac would impact on these shores.
But sentiment soon turned to relief at the JP Morgan and Citi figures, sending shares in Britain's top five banks soaring. Barclays ended the week up 20% at 320.25p and RBS rose 8% at 197.6p.
The half-year results season will get under way this week with figures from Rolls-Royce and GlaxoSmithKline. GlaxoSmithKline's boss Andrew Witty will present his first set of results on Wednesday after succeeding Jean-Pierre Garnier as chief executive in May.
Charles Stanley Stockbrokers is expecting pre-tax profits of £1.9m for the three months to June 30, just higher than the consensus for £1.84m. But this is roughly in line with the £1.87m seen in the previous three months, down from £2.14bn last year after Avandia sales took a hammering.
A slowing UK economy is expected to impact the UK results of Vodafone when it issues a trading update on Tuesday.
Broker Lehman Brothers said it was expecting a slowdown in Vodafone's UK organic revenue growth, to 3.4% during the first quarter compared with the prior year. This compares with 3.8% growth seen during the previous quarter, and 5.9% before that.
Engines giant Rolls-Royce will reveal how it is faring in challenging aerospace conditions when it issues interim results on Thursday. Chief executive Sir John Rose warned investors in May that the credit squeeze and increased fuel costs were putting pressure on airline operators.
Britain's biggest manufacturer said it had started 2008 well, thanks to its global spread as a buoyant oil and gas industry boosts its marine and energy businesses.
Defence work is also strong. This month the firm won £84m of contracts to supply propulsion equipment for offshore vessels being built in China and South Korea.
In 2007, Rolls-Royce produced pre-tax profits of £800m – 13% ahead of the previous year – after increased trading profits across all its businesses.
The Bank of England's dilemma over runaway inflation and slowing growth will be laid bare on Wednesday when minutes of the latest interest rate meeting are published.
Rate-setters on the Bank's Monetary Policy Committee (MPC) held borrowing costs at 5% this month, despite mounting signs of economic gloom fuelling fears of a recession.
But with inflation rocketing half a percentage point to 3.8% in June – nearly double the Government's 2% target – any scope for an interest rate cut to boost growth looks scarce. Indeed, July's minutes could reveal more pressure in the MPC for a rate hike to bring prices down.
The full article contains 617 words and appears in Scotland On Sunday newspaper.
