The much-battered property sector received a boost amid reports of a potential bid for Liberty International, the shopping centre developer.

Liberty’s shares bounced 87p to £10.30 on twice the average volume. Westfield, of Australia, one of two rumoured candidates and owner of the White City centre in West London, may have a job persuading shareholders who have had their fingers burnt with the collapse of Centro, the shopping centre investor.

The other potential predator – GIC, the state investment company of Singapore – is thought to have looked at buying Meadowhall, in Sheffield, from British Land, but could not agree terms. Sir Donald Gordon, Liberty’s founder and former chairman, who holds 21 per cent, is said to have been buying stock of late.

Hammerson rose 61p to £11.34 and British Land gained 52p to 988p.

The FTSE 100 closed up 85.8 points at 5,853.5 amid talk of an imminent rescue package for Ambac, the bond insurer, but many of the banks were held back by going ex-dividend. These included Royal Bank of Scotland, down 12¼p at 355p, Lloyds TSB, down 12p at 428¼p, and Barclays, off 9¼p at 447½p. HBOS ended a five-day slide from 700p, rising 31p to 566p after ABN said that the price had fallen too low.

Prudential was up more than 41p at 643½p after shareholders in Ping An, the Chinese insurer, approved its $17 billion share issue to fund overseas acquisitions. Legal & General rose 4.9p to 125p,Standard Life gained 8¼p to close at 216p and Aviva was up 22p at 602p – all also buoyed by hopes of a rescue for bond insurers.

British Airways rose 14½p to 265p before its investor day today, although analysts said that there were likely to be profit downgrades over rising fuel costs. Oil prices set a record yesterday. The Government’s promise not to levy environmental taxes on airlines also helped to lift the sector. EasyJet was up 17¾p to 425¾p and Ryanair rose 16¼c to €3.28¼.

Inmarsat rose 8p to 492p ahead of results today. The satellite telecoms operator may be a candidate for entry into the blue-chip index next week and there are vague hopes of a bid from Harbinger, the activist US fund that has built a 28 per cent stake.

Harbinger has also been stake-building in Tate & Lyle, down 2½p at 514½p, which, with Bunzl, up 12½p at 717p, and ENRC, the Kazakhstan iron ore miner, up 18p to a new high of £11.23, is seen as a candidate for promotion. Kazakhmys, which owns 15 per cent of ENRC, was up 88p to £17.33.

Yell Group continued its slide, off another 1¼p to 199¼p.

British Energy was still falling, off 10½p to 547p. ING analysts said this week that nearly half its ageing reactors would have to be shut down before it could build any new ones.

— New York: Shares on Wall Street managed a moderate gain in an erratic session as investors sorted through a downbeat Federal Reserve assessment of the economy and were also disappointed by a plan to bail out Ambac, the troubled bond insurer. The Fed’s Beige Book report on regional economies indicated that growth at the start of the year was sluggish and accompanied by rising price pressures. The Dow Jones industrial average closed at 12,255.00 points, up 41.20.

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