FTSE ends up as falling oil eases inflation worry

By Atul Prakash

LONDON (Reuters) - The top share index closed 0.2 percent higher on Friday as a sharp drop in crude prices eased inflation concerns and cheered banks and retailers, outweighing negative miners that tracked falling metal prices.

The commodity-heavy FTSE 100 .FTSE ended up 11.7 points at 5,489.2, closing the week about 2.5 percent higher. The index remains down 15 percent so far this year.

Crude oil prices fell more than 3 percent to around $116 a barrel, down about 20 percent from a record high above $147 nearly a month ago and raising hopes that lower inflation would stimulate spending by consumers and business.

"The market is in the right direction, underpinned by a downturn in the oil price ... But there is still a lot of nervousness," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"We are, broadly speaking, at the end of the half-yearly results season for the banks, which have not been particularly good in terms of the actual numbers. But they have at least exceeded expectations."

The banking sector topped the FTSE gainers list, helped by better-than-expected results from Royal Bank of Scotland (RBS.L). A 5.9 billion pound writedown on risky assets resulted in a first-half loss of 691 million pounds.

Royal Bank of Scotland (RBS.L) was up 3.2 percent, HSBC (HSBA.L) gained 1.9 percent and Standard Chartered (STAN.L) added 1.7 percent. But Barclays (BARC.L) fell 2.3 percent and HBOS HBOS.L shed 1 percent.

"While there may be a feeling that the worst is behind the banking sector, any meaningful push upwards by investors will surely need to build on this week's positivity to finally burst the 5,500 barrier," said David Jones, strategist at IG Index.