RBS gains as economic optimism aids banks Royal Bank of Scotland led the way yesterday as economic optimism put the banks among the FTSE 100 risers. Upbeat business confidence data combined with rising bond yields and stable sterling to lift the UK banks sub-index to its highest in more than a month. The sector is the FTSE's most economically sensitive, with earnings 90 per cent correlated to the domestic purchasing managers" index, according to JPMorgan Cazenove. RBS, up 4.4 per cent to 288.8p, was also helped by growing cynicism about whether the government would push on with proposals to split the lender. Investec Securities argued that minority shareholders could oppose such a move. "We would hope that the Chancellor will see sense and step back from the brink," said analyst Ian Gordon, who repeated "buy" advice. By the time his assorted advisers report back after the summer, RBS's non-core book will be comfortably below £50bn, evidencing both the exceptional progress delivered in this regard under CEO [Stephen] Hester, as well as the futility of any separation now. Among peers, Barclays was up 2.4 per cent to 298.6p and Lloyds Banking Group took on 3.8 per cent to 67.1p, helped by news that private equity group Corsair was weighing up buying the majority of the government's 39 per cent stake. Insurers also mirrored the market trend, with Resolution adding 3.8 per cent to 305.8p. The FTSE 100 rose 1.2 per cent or 74.55 points to 6,450.07. Since nearly erasing its 2013 gain a fortnight ago on tapering fears, the index has bounced 7 per cent. Ashmore climbed 5.9 per cent to 343p ahead of a year-end trading update due Thursday, which analysts at RBC said should be better than feared. Ashmore has sharply underperformed peers over the past month due to its focus on emerging market debt, where funds have been suffering record outflows. RBC forecast Ashmore to report flat net inflows but saw a chance of a positive surprise, as inflows from governmental and sovereign wealth fund mandates "are difficult to predict and may not be visible in industry data." While such clients usually get price discounts, a positive fund reading could still trigger a short squeeze, it said. Housebuilders extended their recent rally after Bovis Homes said trading remained bolstered by the government's Help to Buy mortgage subsidy. Bovis rose 7.1 per cent to 830p, Barratt Developments was up 3.7 per cent to 342.9p and Taylor Wimpey added 3.4 per cent to 106.3p. Crest Nicholson added 4.1 per cent to 354p, with Barclays picking the housebuilder among its favoured ways to play a UK economic recovery. Other picks included Dixons , up 3.6 per cent to 43.4p, Rightmove , ahead 1.2 per cent to £22.32, and Northgate , up 0.5 per cent to 331.5p. Topps Tiles edged 0.3 per cent higher to 72.3p after Goldman Sachs added the retailer to its "conviction buy" list. "We believe Topps Tiles is poised to benefit from an increase in housing turnover driving greater spend on floor coverings," it said. Sales can now accelerate as meek growth since 2004 has reflected "cannibalisation from store openings and a low level of housing turnover," the broker said. Hikma climbed 5.6 per cent to £10.50 after the generic drugmaker raised full-year earnings guidance, thanks to a windfall caused by supply shortages of the antibiotic doxycycline. The US price per prescription for the drug peaked at $62 in February, against an average of just 80 cents last year, according to data from Merrill Lynch. With prices likely to have normalised by 2014, the "fleeting opportunity" provided an exceptional boost of about 10 per cent to this year's earnings, the broker said. Among the fallers, Betfair lost 4.5 per cent to 840p on word that SoftBank had sold its 10.6 per cent stake at 827p a share. Contractor Balfour Beatty slid 1.9 per cent to 211.7p on a downgrade from Merrill Lynch, its house broker. Hopes for profit to rebound next year looked too optimistic as market conditions remain challenging, it said.