Biggest ever one-day rise for FTSE 100

The move by UK and US authorities to ban short sellers and the US government's plan to take over the toxic loans held by big banks has had the desired effect, at least for the moment.

The FTSE 100 jumped 431.3 points to 5311.3, an 8.84% increase which marks its biggest ever one-day rise, while Wall Street had soared by around 350 points by the time London closed. The previous high was a 7.89% daily rise in the wake of the Crash in October 1987.

Today, dubbed "Freaky Friday" by strategist Mike Lenhoff of Brewin Dolphin, has seen £103bn added to the value of Britain's leading shares.

In a week when Lehman Brothers collapsed, Merrill Lynch was sold, insurance giant AIG was taken into US government ownership, the UK's biggest mortgage lender HBOS was rescued by an agreed bid from Lloyds TSB and the central banks pumped billions of dollars into the money markets, it is almost unbelievable that the FTSE 100 has lost just 100 points since Monday morning.

But that disguises the roughly 530 point fall in between times. And it was not all good news, with three month sterling libor - the rate at which banks lend to each other - edging up from 5.97% to 6% today despite all the attempts to improve liquidity.

The controversial decision by the Financial Services Authority to ban short selling of 32 financial stocks sent the companies' shares soaring. While many welcomed the regulator's move - "the hedge funds won't be happy but it probably needed to be done to restore confidence" was one comment - some in the City questioned whether the level of shorting of these shares was really significant.

But, as one trader pointed out, there were some big deals at hefty prices almost as soon as the market opened, suggesting investors may have been scurrying to cover their short positions as soon as they could. An example was Barclays, which closed on Thursday at 301p but saw 7.8m shares go through at 475p first thing. Barclays ended 88p better at 389p, a 29% increase.

Royal Bank of Scotland rose 51.7p to 213.5p, while HSBC added 123.5p to 919.5p as it dropped a $6.3bn offer for 51% of Korea Exchange Bank. Analysts said HSBC could now turn its attention to one of the distressed Western financial institutions, such as Washington Mutual.

Meanwhile Lloyds took advantage of the rise in its shares to raise £800m with a placing. It closed 48.25p better at 285.75p, making the value of its all share offer for HBOS around 237p a share. HBOS closed 49.9p higher at 222.5p.

Bank of Ireland jumped 42% to €5.26 despite denying reports it had received an approach from Spain's Banco Santander.

Insurers also benefited from being on the FSA list, with Old Mutual recovering 13.4p to 82.4p and Prudential up 114p to 600p.

Other sectors where shorters had been active, such as housebuilders, moved higher despite not being included in the FSA ban. Persimmon ended 41.5p higher at 435.25p and Taylor Wimpey closed 8p better at 55p.

Spread betters were hit by concerns that the FSA ban might damage their business, but soon recovered. IG Group, which finished 9.75p higher at 332p, said the effect of the move would be negligible, while London Capital, which owns Capital Spreads, added 10p to 298p. Broker Cenkos issued a buy recommendation on London Capital, saying it should benefit from the current market volatility.

Morrison Supermarkets was one of the few fallers on the day. Initially it appeared that Paul Howell, a trustee for funds associated with former chairman and honorary president Sir Ken Morrison, had sold some of the 106m shares listed in his name to take his stake from 3.98% to below 3%. It seems, however, that no shares have been sold and the move is merely a reshuffling of the Morrison family interests. Still, the idea of the family selling shares, even if erroneous, was enough to leave the company 2.5p lower at 256p.

Defensive stocks such as British American Tobacco, down 25p to £18.05, were out of favour, but British Energy recovered from earlier falls to close up 6p at 720.5p ahead of an expected £12.4bn bid from France's EDF.

On Aim, Elixir Petroleum jumped 26% to 5.5p. after a successful roadshow by the oil and gas exploration company's chief executive Andrew Ross.

Finally energy consultancy RPS added 20p to 289.75p after paying £1.9m for specialist laboratory business Mountainheath Services. Joint house broker Investec said further acquisitions could be on the cards. "RPS has begun exploring a range of new opportunities and discussions are going well with businesses that are operating in robust markets," said the broker. "With the possibility of a number of further acquisitions in the remainder of 2008 and associated potential upgrades we reiterate our buy recommendation."