FTSE:5,789.99 (+37.18) Mid-250:11,592.41 (+64.63) Small Cap:3,261.60 (+24.55)

SHARES IN London were higher in early trade yesterday, as banks clawed back some of their sharp losses of the previous session.

The mood improved after short-term debt auctions in Spain were well supported.

Equity investors, however, were monitoring euro zone yields, which fell following the Madrid auction, easing some of the tension in the market.

Sentiment remained partially clouded, however, by US debt issues, as politicians continued to discuss raising the debt ceiling ahead of the August 2nd deadline, or face the prospect of default.

“Debt news clearly remains high on the agenda, with the US deficit ceiling discussions ongoing, while default in the euro zone still remains something of a risk too,” said Cameron Peacock at IG Markets.

Ahead of results from US banking groups Goldman Sachs and Bank of America, UK lenders were recovering from yesterday’s bruising session.

Royal Bank of Scotland gained 0.4 per cent to 33.08p, Lloyds Banking rallied 4.3 per cent to 43.13p.

Barclays climbed 1.9 per cent to 211.5p and HSBC added 0.4 per cent to 593.7p.

By the close, the FTSE 100 was up 0.7 per cent.

Miners bounced, tracking firmer metal and oil prices, and helped by positive comment from BofA Merrill Lynch, which argued that gold equity plays looked particularly cheap given the sharp rise in the precious metal.

Kazakhmys climbed 3.2 per cent to £13.43 and BHP Billiton added 1.7 per cent to £23.26.

Johnson Matthey, the speciality chemicals and platinum group, climbed 4 per cent to £20.15, after saying it expected first-half profit to be “significantly ahead” of last year following a strong rise in demand for catalytic converters for diesel engines.

British Land fell 1.1 per cent to 598p after Goldman Sachs cut its rating on the developer from “buy” to “neutral”.

Henderson, the mid-cap fund manager, climbed 3.9 per cent to 154.9p, after stating it was on course for a 79 per cent bounce in first-half core profit.

The mid cap FTSE 250 climbed 0.6 per cent.

BSkyB added 2.9 per cent as JP Morgan Cazenove raised its price target for the satellite broadcaster ahead of results due on July 29th. – (Copyright The Financial Times Limited 2011/Reuters)