FTSE climbs on the back of mining and banking stocks

The FTSE 100 Index closed up 30.20 points at 5753.85 as Wall Street also gained because of positive earnings reports that helped build on Friday's upbeat US housing market data.

The Dow Jones Industrial Average added 0.4 per cent at one point after Caterpillar joined other companies in reporting that there were more signs of an improving world economy.

Caterpillar, the heavy machinery maker, raised its full-year profit forecast, saying "economic conditions are definitely improving".

The stock gained 5.7 per cent to $72.64 and was the top boost on the Dow.

Bank shares fell, with Citigroup down 2.3 per cent to $4.75 after the US Treasury said it would begin selling part of the 27 per cent stake it holds in the bank after $45bn in bailouts.

Meanwhile, European markets were more than 1 per cent higher amid hopes that Greece's aid package will ease its debt crisis.

But the euro was back under pressure as fears resurfaced over the risk that Greece's problems might spread to other EU countries and that a debt restructuring or even default could still be on the cards.

Amid the concern, the pound gained 0.8 per cent against the euro to 1.16. Sterling was also higher against the dollar at 1.54.

Commodity stocks benefited after a rise in metal prices as Antofagasta lifted 701/2p to 1064p and Kazakhmys rose 50p to 1480p.

The performance of the state's banking shares carried extra significance because of Royal Bank of Scotland's admission at the weekend that it would have to reform its bonus scheme.

RBS, which advanced by 21/4p to 58p on improved recovery prospects, plans to revisit some of the details of the scheme, which contained a 50p threshold for the share price element of the payout.

Meanwhile, the taxpayer received a further boost as Lloyds Banking Group shares climbed 13/4p higher to 701/4p.

At current share price levels, the Government is comfortably out of the red on its holdings in the two banks.

The biggest faller in the top flight was BSkyB, which dipped 2 per cent – off 14p to 616p – after broker Jefferies International lowered its rating on the stock to hold.

The satellite broadcaster is due to present quarterly figures later this week.

Takeover talk had a major impact on shares in the FTSE 250 Index, led by power supply firm Chloride which received a bid approach from US industrial giant Emerson Electric.

The second approach in as many years from Emerson values Chloride at 723m and caused shares in the UK firm to rally 42 per cent, or 88p to 297p – well above the proposed offer price.

Chloride rejected the approach but analysts said there was still room for a new offer, possibly from a rival firm such as Ohio-based power firm Eaton.

The possibility of consolidation in the housebuilding sector, following interest in privately-owned Crest Nicholson from entrepreneur Hugh Osmond, lifted shares in a number of major players.

Barratt Developments rose 53/4p to 1373/4p and Bovis Homes added 83/4p to 449p.

But a positive trading statement from Redrow was treated with indifference by brokers who said there was more value to be had elsewhere in the sector.

The firm lost earlier large rises to end just 1/4p higher at 1513/8p, despite saying it would return to profit in the second half.