Lloyds Banking Group failed to be lifted by a buoyant market after Credit Suisse analysts said that nearly a fifth of its loans to businesses were no longer being paid and that the cost of refinancing its own debt was climbing.

Jonathan Pierce, Credit Suisse’s bank analyst, said that he was not warming to the idea that Lloyds was on the road to recovery. In the short term, he said, income from its deposits would shrink, because other banks were able to offer savers higher interest rates, and in the longer term its income and margins would be hit by having to write down a big chunk of its corporate lending.

Mr Pierce kept his “sell” advice and cut his price target from 55p to 50p. Lloyds fell 1.68p to 68¼p.

The bank was one of the very few weak stocks in a FTSE 100 that welcomed the first day of the new quarter by rising 91.5 points to 4,340.71. The rally was driven by commodities, triggered by China’s June purchasing managers’ index, a measure of raw material demand from its factories, which showed growth for the fourth month in succession.

Vedanta Resources, the Indian metals miner, which supplies China, was the top performer, rising 127p to £14.22 as it boosted the size of its share buyback programme. Antofagasta, the copper miner, rose 37p to 624.42p.

There was also talk that China’s steel industry was ready to give up its demand for a steeper cut in iron prices than other big consumers, such as Japan and South Korea.

That benefited BHP Billiton, up 61p at £14.25, and Rio Tinto, up 53p at £21.58. Rio was also lifted by relief that Chinalco looked like taking part in its rights issue.

Crude oil prices were initially boosted by China’s economic data and lower American stockpiles, and that helped oil shares to rise. BG Group climbed 43p at £10.61 as analysts reacted positively to Tuesday’s investment in shale gas in the United States.

International Power rose 15¾p to 253¼p as it alleviated some of its debt worries by agreeing to sell its Czech power stations to a local private equity firm for £581 million.

Marks & Spencer rose 11½p to 317¾p after reporting a smaller than expected drop in first-quarter sales and saying that consumer spending seemed to be stabilising. Next rose 57p to £15.24 in sympathy.

Credit Suisse upgraded the European telecoms sector, saying that fixed-line operators would be more resilient to the recession than mobile phone companies, whose profits would be weakened by tariff cuts and people switching from mobile calls to texting. That helped BT to rise 3.65p to 105p.

Man Group was the worst blue-chip performer, closing 15½p down at 262p after going ex-dividend. National Express fell 25½p to 284p after losing its East Coast rail franchise.

Taylor Wimpey rose 2½p to 36p and Persimmon 5¼p to 355¼p as Merrill Lynch upgraded both from “neutral” to “buy”, saying that their prices had fallen too far.

Yell fell 4¾p to 25p amid worries over its debt talks. After the close, Standard & Poor’s cut Yell’s rating another notch with a negative outlook.

• New York: Prospects for America’s jobless figures to be announced today tempered promising early gains on Wall Street. The Dow Jones industrial average closed 57.06 points higher at 8,504.06.