A herb used by the Guarani tribe of Paraguay wiped 7p off Tate & Lyle to 445¼p. US outfit Wisdom Natural Herb said that it was ready to distribute a sweetener based on the stevia leaf to tabletops across America, cutting into already weak sales of Tate’s Splenda.

Meanwhile, Indian generic drug producer Alkem has said it will produce its own version of Tate’s sweetener ingredient Sucralose in Europe, using different techniques so that it does not violate Tate’s patent.

Ian Kellett, a Numis analyst, said the two threats were likely to force Tate to cut prices of Sucralose and Splenda, hitting margins earlier than expected.

The FTSE 100 ended up 25.2 at 5,995.3 on a rally of banks and retailers. Citigroup’s Tom Rayner, a long-time bear of UK banks, called the bottom on Royal Bank of Scotland a day before its £12 billion rights shares start trading, sending the price up 9½p to 259p. He said that, having fallen 25 per cent since it announced the rights issue, the stock looked cheap.

RBS has written down most of its exposure to toxic derivatives and should have enough capital reserves even if it fails to sell its insurance arm, he said. If its loan book losses doubled, the total value of its assets would fall by only up to 15 per cent.

HBOS, which has its own £4 billion rights issue coming soon, also bounced, up 17½p to 357¾p.

But it was Home Retail Group, the owner of Homebase and Argos, that was the top performer, up 13½p to 252p as investors piled in ahead of a trading statement next week.

Kingfisher, the owner of rival B&Q, up 3.6p to 139.5p, helped sentiment with slightly better than expected figures on Wednesday. Lehman believes that, even though Homebase is suffering, the fast-growing Argos accounts for the bulk of earnings. It reiterated “buy” advice on HRG with a 360p price target, saying management bonuses unveiled in the annual report should drive performance.

Alliance & Leicester, likely to be ejected from the top 100 next week, went against the bank rally, losing 13p to 399½p. Ferrexpo, set to replace it in the blue chip index, jumped 8½p to 407p after it raised its estimate for iron ore at its mine in Ukraine by 127 per cent, which means its reserve – the fourth-largest in the world – will last it beyond 2035.

Lonmin lost 104p to £33.50 as South Africa’s national power company warned of more blackouts and inflationary fears grew. Goldman Sachs cut Lonmin to “neutral”, saying that it did not like its exposure to the weakening South African rand.

Vodafone recovered from earlier falls, ending up 5.8p at 160.45p as analysts warmed to the potential cost savings from its $30 billion (£15.3 billion) acquisition of Alltel in the US.

Housebuilders rebounded with Bellway up 32½p to 626½p on relief that its warning over a profit slump was not as bad as feared. But analysts at KBC Peel Hunt pointed to greater debt than expected, which would prevent it snapping up bargain land.

— New York: Wall Street shares rose as upbeat May sales data from retailers, including Wal-Mart, and a surprise fall in weekly claims for unemployment benefit boosted hope about the US economy’s strength. The Dow Jones industrial average closed up 214.00 points at 12,604.50.

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