FTSE closes at 6306.2

Updated 17.33 Wed Sep 12 2007

Keywords: Mervyn King, FTSE 100 Index, Bank of England

The London market reversed losses after comments from the Bank of England fuelled hopes that interest rates had peaked.

The FTSE 100 index closed up 25.5 points at 6306.2 after the Bank's governor Mervyn King suggested that rates would be held at 5.75 per cent until the current turmoil in financial markets passed.

The FTSE 100 Index closed up 25.5 points at 6306.2

He also hinted policy-makers were ready to cut the cost of borrowing if the credit crisis deepened.

BAE shot to the top of the risers board, ahead 14.75p at 478.25p, or 3 per cent, following reports that the company was set to claim a $3.5 US dollar (£1.75bn) contract from the US Army.

Armor Holdings, which was acquired by BAE earlier this year, has been named as "sole source" for the order to supply the military with 10,000 new trucks.

ITV group lost 1.7p to 111p after announcing plans to revamp its strategy and programming

Clothing retailer Next fared well, gaining 42p to 1982p on broker upgrades after Tuesday's better than expected profits.

Home Retail Group was also on the front foot after the firm said it was on track for healthy profits as gains from its Argos stores offset sales declines at Homebase.

After a grim session for retailers yesterday, the update lifted Home Retail Group 10p to 410.75p.

Nuclear power supplier British Energy meanwhile moved 9.5p higher to 495p, after a positive note from Goldman Sachs, which said higher oil prices, which hit record levels, should give the group a boost.

Miner BHP Billiton was among those hit, down 15p to 1456p, while pest control to hygiene group Rentokil Initial dropped 2.2p to 168.7p.

Coal-fired power station owner Drax was up 0.5p at 627.5p after Goldman Sachs said recent falls in the share price were overdone.

It was also confirmed that Drax will drop out of the top tier when the FTSE Group completes its quarterly reshuffle towards the end of the month.

Winners: BAE Systems up 14.75p at 478.25p, Reckitt Benckiser ahead 73p at 2739p, British American Tobacco up 42p at 1679p and Home Retail Group ahead 10p at 410.75p.

Losers: Legal & General down 3.1p at 133.4p, SABMiller off 23p at 1328p, ITV down 1.7p at 111p and Rentokil Initial off 2.2p at 168.7p.