Market round-up: FTSE gains over 2% as Lloyds shares surge on special dividend

UK and European stocks rallied on Thursday (25 February), as upbeat company news helped offset a fresh bout of volatility in the oil market and a dismal session in China.

London's FTSE 100 closed up 2.48% to 6,012.81 followed into positive territory by its European counterparts, as Germany's Dax and France's CAC 40 gained 1.79% and 2.24% respectively, while the Pan European Stoxx 600 rose 1.97%.

"Markets in Europe have the good corporate news while simultaneously ignoring softer inflation data out of the Eurozone," said IG's analyst Alastair McCaig. "Financials have surprisingly been the sector due the most credit for the FTSE's performance, with the news that Lloyds will be paying out a special 0.5p dividend most encouraging for those investors hunting for an income stream."

Lloyds was the standout winner of the day on the FTSE 100 after the lender revealed it will pay out a special dividend of 0.5p per share, despite posting a drop in profit after it was forced to book another £2.1bn in future compensation costs for PPI mis-selling.

RSA Insurance Group was also on the front foot after it said operating profit jumped 43.3% year-on-year to £523m, while underwriting profit soared from £41m to £220m. At the other end of the scale, Capita was in the red after its full year profit declined on the back of business exits and impairment charges, although the group but said it was targeting organic revenue growth of at least 4% this year.

Serco and National Express were among the best performers on the FTSE 250. The former reported a sharp reduction in its pre-tax loss on the back of a decline in costs related to restructuring operations, while the latter revealed its annual pre-tax profit almost doubled in 2015 as a number of one-off charges it booked in the previous year did not recur.

However, there was negative news for Beazley, which led the fallers on London's second tier index after the board of the insurance group unveiled plans to relocate the business from the UK to Ireland.

Oil prices reversed the previous session's late gains and fell again, with Brent crude losing 1.83% to $33.79 (£24.22, €30.62), while West Texas Intermediate lost 2.32% to $31.42 a barrel, although the latest decline did not seem to worry economists.

"Even if, as we expect, there are no cuts in production by the major OPEC countries, high growth in demand should be enough to rebalance the market," said Tom Pugh, analyst at Capital Economics.

"This should put upward pressure on prices in the second half of the year. But it may take even longer for the market to move into a substantial deficit, and the exceptionally high level of stocks means that the market will remain well supplied for some time."

On the macroeconomic front, according to figures released by the Office for National Statistics, the UK economy grew 0.5% between the third and the fourth quarter of 2015, lifted largely by consumption expenditure.

FTSE 100 - Top 5 risers

Lloyds Group +13.46%
RSA Insurance +10.14%
International Consolidated Airlines +5.37%
Royal Bank of Scotland +5.34%
Barclays +5.10%

FTSE 100 - Top 5 fallers

Capita Group -5.78%
Rio Tinto -3.39%
Randgold Resources -2.93%
easyJet -0.99%
Fresnillo -0.30%

FTSE 250 - Top 5 risers

Serco Group +16.22%
NMC Health +11.05%
National Express Group +9.72%
UBM +9.08%
Playtech +6.53%

FTSE 250 - Top 5 fallers

Evraz -3.82%
Beazley (ex dividend) -3.51%
Fidelity China Special Situations -2.88%
Countrywide -2.46%
Riverstone Energy Limited -2.30%