Royal Bank of Scotland's underwriters - Goldman Sachs, Merrill Lynch and UBS - look set to have sold some 95 per cent of the rights today according to traders, seeing off an attempt by some hedge funds to short sell the stock.

"Looks like they've been squeezed," said one senior trader, referring to short sellers. RBS shares, although they were down 4.5p too 254.5p, staged a rally in the past three days rising from a low of 226p. They were driven down 25 per cent since the announcement of the £12 billion issue by a combination of retail investors and those in the US who are not entitled to the rights selling their rights and hedge funds betting that the underwriters would be left with a big block of stock - creating an overhang.

RBS has been helped by a series of upgrades from analysts including well known bear Tom Rayner at Citigroup yesterday. It is issuing 11 new shares for every 18 existing shares at 200p per share, ensuring those who take up the rights, which were trading down 17.5p at 40p, will still get a discount to the current market price.

Scottish & Southern Energy rose 4 per cent to £15.32 after Morgan Stanley upgraded to buy with a £17.80 target saying the prospects for its £1.35 billion acquisition of wind farm developer and operator Airtricity looked far better than it first expected.

Higher commodity price were making wind farms far more profitable, it said, while the company seemed more confident of approval for some of its developments and turbine costs were not rising as fast as feared.

The FTSE 100 was up 38.5 at 6034.1 benefiting from a strong close on Wall Street and suggestions that US employment figures due today would not be as weak as feared.

Another surge in the price of oil hit airlines with British Airways down 5 per cent at 241p and EasyJet down 5.5 per cent to 315.4p.

Oil stocks, naturally, jumped with Cairn Energy up 4 per cent to £33.16 and BG Group up 3 per cent to £12.63. BP was up 2 per cent to 594p.

Standard Life was down 4 per cent at 251.25p after Deutsche bank downgraded it to sell and cut its target to 266p. It said Standard Life was one of the most exposed stocks to a deteriorating UK economy.

Miners rebounded from recent weakness, as the prices of some metals staged a recovery.

A buy note by Merrill Lynch naming Xstrata, Anglo American and Lonmin as its top picks since they would be beneficiaries of soaring coal and platinum group metals prices

Xstrata rose 3 per cent, Lonmin 1.5 per cent and Anglo American 1.2 per cent.

Microchip designers were on the rise after stronger than expected sales and earnings from National Semiconductor Group in the US. ARM holdings ws up 4 per cent to 108p while CSR gained 3.75 per cent and Wolfson Microelectronics 2 per cent.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive