* FTSE 100 rises 7.8 pct to snap 4-day losing run
* Index on track for biggest daily gain since Oct. 1987
* Financials top-weighted gainers on U.S. asset plan
* UK FSA bans short-selling on 29 financial stocks
By Dominic Lau
LONDON, Sept 19 (Reuters) - Britain's top share index soared
7.8 percent by midday on Friday to snap a four-day losing run,
as banks rebounded sharply on a radical U.S. government plan
aimed at tackling the crisis besieging financial markets.
By 1046 GMT, the FTSE 100 <> was up 379.7 points at
5,259.7, on track for its biggest one-day percentage gain since
Oct. 21 1987, when it closed up 7.89 percent.
A temporary ban by UK financial regulators on short-selling
of 29 financial stocks also boosted the FTSE 100, which had
fallen nearly 10 percent from Monday to Thursday.
Battered banks bounced sharply, tracking gains in the U.S.
and Asian markets, with the FTSE 350 bank index <.FTNMX8350>
soaring 22 percent.
Barclays <BARC.L>, HSBC <HSBA.L>, Royal Bank of Scotland
<RBS.L>, Lloyds TSB <LLOY.L>, HBOS <HBOS.L> and Standard
Chartered <STAN.L> leapt between 12.6 and 40.5
percent.
Wall Street on Thursday posted its biggest one-day
percentage gain since October 2002 -- when the last bull market
was born -- after a congressional aide said U.S. Treasury
Secretary Henry Paulson has been circulating a proposal to
lawmakers that would create an entity to deal with the billions
of dollars of bad debt still clogging the financial system.
[]
The idea has been compared to the Resolution Trust Corp
formed in 1989 to fix the savings and loan industry collapse.
"So far policymakers have dealt with it on a piece by piece
basis and they have not got ahead of the curve. This is capable
of getting them ahead of the curve. This is very good news,"
said Neil Dwane, chief investment officer in Europe for RCM.
In the UK, the Financial Services Authority imposed a
temporary ban on short-selling financial stocks until Jan. 16
2009.
"At the end of the day, it's going to be a good thing if
speculation is put to bed because it's not very good for the
market or the economy to have this false situation," said Paul
Mumford, senior fund manager at Cavendish Asset Management.
However, he said there would be gyrations in the market in
the near-term because positions were being unwound by
short-sellers.
NO SHORTS ALLOWED
Broker Daniel Stewart said in a note the FSA decision would
hurt spreadbetting companies, the London Stock Exchange <LSE.L>
and interdealer brokers.
LSE shares were up nearly 14 percent, while ICAP <IAP.L>,
the world's biggest interdealer broker, jumped 17.4 percent and
mid-cap spreadbetter IG Group <IGG.L> put on 5.5 percent.
The Securities and Exchange Commission said short selling of
799 financial stocks is to be halted in the United States under
under an emergency order aimed at protecting investors and
markets. []
UK insurers also registered strong gains, with Prudential
<PRU.L>, Old Mutual <OML.L>, Standard Life <SL.L>, Admiral Group
<ADML.L> and Aviva <AV.L> rising 11.3 to 26.8 percent, while
hedge fund Man Group <EMG.L> gained 6.2 percent.
Energy stocks rose along with higher crude prices <CLc1>. BP
<BP.L>, Royal Dutch Shell <RDSa.L>, gas producer BG Group
<BG.L>, Cairn Energy <CNE.L> and Tullow Oil <TLW.L> were up
between 2.5 and 12.9 percent.
In the mining sector, BHP Billiton <BLT.L>, Rio Tinto
<RIO.L>, Anglo American <AAL.L>, Xstrata <XTA.L>, Vedanta
Resources <VED.L> and Antofagasta <ANTO.L> gained 10 to 16
percent as precious metal prices stayed firm.
Retailers and property shares were also in demand as
sentiment improved. Marks & Spencer <MKS.L>, Next <NXT.L>,
Hammerson <HMSO.L>, Land Securities <LAND.L>, British Land
<BLND.L> and Kingfisher <KGF.L> surged 5.5 to 12 percent.
(Additional reporting by Jon Hopkins; Editing by Erica
Billingham)
