FTSE 100 climbs after HBOS deal

An overnight rescue deal for HBOS from Lloyds TSB boosted the FTSE 100 on opening this morning, pushing the index up 8.2 points to 4,920.60.

The £12 billion deal between HBOS and Lloyds, brokered by the government, has bolstered confidence in the bank and HBOS' share price rose to 181.90p in early trading, a 23.66 per cent rise from last night's close.

Shares in Lloyds TSB were down slightly on the news this morning, by seven per cent to 259.75p by 08:33 BST.

Barclays also benefited from the news and shares in the bank were up 5.5 per cent this morning to 335.25p.

Yesterday, Barclays took an optimistic view of the situation and swooped on Lehman Brothers following the bank's collapse, buying its New York headquarters and its North American investment business.

Stock markets around the world tumbled yesterday on growing fears over the world economy, despite the efforts of the US to save insurer AIG from failing.

The Dow Jones industrial index closed 4.06 per cent down yesterday at 10,609.66, while Japan's Nikkei share average fell 3.2 per cent to a three-year low and Hong Kong's Hang Seng index ended 7.38 per cent down, led by banking stocks.

Investors will be keeping an eye on the financial situation in the US today, after sharp falls in the share prices of remaining Wall Street institutions Goldman Sachs and Morgan Stanley.

Other financial data out today in the UK include mortgage lending figures from the Council of Mortgage Lenders and an update on the state of the high street from the Office for National Statistics.