FTSE bounces back 6 percent on bailout

By Simon Falush

LONDON (Reuters) - The country's top share index surged 6 percent early on Monday, recouping some of last week's heavy losses as a government plan to pump billions of pounds into the troubled banking sector lifted flagging sentiment.

By 08:36 a.m. the FTSE 100 .FTSE had gained 236.3 points to trade at 4,168.3 after falling 8.9 percent on Friday and haemorrhaging 21 percent last week, its biggest fall since 1987.

Banks gained after the British government said it would make capital investments worth 37 billion pounds in RBS (RBS.L) and a merged Lloyds TSB (LLOY.L) and HBOS HBOS.L. The FTSE 350 banks index .FTNMX8350 surged 7.6 percent.

Lloyds gained 11.4 percent after it said it had renegotiated its agreed takeover of rival HBOS, dropping its offer to 0.605 of a Lloyds share for every HBOS share, down from the 0.833 agreed on September 18.

HBOS was down 9 percent, the only stock in the blue-chip index showing a loss.

"The market is giving a positive first verdict to the weekend's events. I don't think any more could be expected as the scheme was large, coordinated and covers all angles. Let's hope it works," said Paul Kavanagh, head of market strategy at stockbrokers Killik.

BARCLAYS BOOSTED

Barclays (BARC.L) gained 13.5 percent after it said it would boost its capital by more than 6.5 billion pounds but expected to do so without government help.