FTSE 100 index up 0.7%; Third-quarter GDP declines 0.6%
LONDON (MarketWatch) -- London shares advanced on Tuesday, with battered banking firms such as Royal Bank of Scotland taking back some ground lost over the year.
The U.K. FTSE 100 index
The U.K. FTSE 100 index (UK:UKX: news , chart , profile ) rose 0.7% to 4,277.41. Other European shares were also trading higher, while U.S. stock futures were mixed. See Europe Markets.
Investors are preparing for a holiday-shortened week, with trading volumes expected to be thinner than usual. Asian markets dropped sharply on Tuesday in thin trading as investors rushed to take profits ahead of the holidays. See Asia Markets.
Banks supported London's top share index, with shares of HSBC Holdings up 1.1%, Royal Bank of Scotland shares up 3.6% and Lloyds TSB shares up 1.2%.
Banks have seen their shares fall sharply over the past twelve months as investors attempted to factor in falling asset values and contracting economic growth, with Royal Bank of Scotland shedding 88% of its value and Lloyds TSB shares dropping roughly 74%.
The sector underperformed the broader FTSE 100 index, which has lost roughly 34% in the past twelve months as investors worry about corporate earnings against a backdrop of downbeat economic growth.
On Tuesday, data showed that third-quarter U.K. GDP was revised down to negative 0.6%, from an earlier estimate of a 0.5% drop.
Retailers have also had a tough year as investors worried about declining consumer spending, particularly over the current key holiday trading period.
On Tuesday, shares of apparel retailer Next fell another 1.6%, while shares of department store operator Marks & Spencer fell 1%.
"This will be the worst Christmas for many years," said retail analysts at Seymour Pierce.
"Almost all the retailers reporting will disappoint based on our figures. Sales will typically be down by 6% to 9% on a like-for-like basis over the Christmas period in apparel, 10% to 13% in electricals and over 10% in home related products. Gross margins will have also weakened from the third quarter," they noted.
They said they continue to believe that it's too early to buy the sector.
Meanwhile, the Telegraph newspaper reported that Whittard of Chelsea, the tea and coffee retailer owned by Iceland's Baugur, is on the brink of administration.
Centrica shares up
Shares in natural gas supplier Centrica rose 1.2%.
The firm may reduce the 3.1 billion pound ($4.6 billion) offer that it has made to Electricite de France for a 25% stake in British Energy after European regulators placed strict conditions on the French group's takeover of the nuclear generator, according to a report in the London Times on Tuesday.
Those conditions include the sale of up to a quarter of the combined group's electricity output and several other concessions that will help ensure a level playing field in the U.K.'s wholesale power market.
The ruling paves the way for EdF to take control of the bulk of Britain's nuclear industry, and the deal is now expected to close early next year.
British Energy shares edged up 0.1%.
Shares in aerospace group Rolls-Royce climbed 1.9%.
The company said that Etihad Airways has chosen the Trent 700EP to power a further eight Airbus A330 aircraft. The value of the engine business, including a long-term services contract, is $575 million at list prices.
