On top of all the other woes that have afflicted the market over the past year, rising commodity prices have been a significant factor. They have certainly taken their toll of Northern Foods, the company behind Goodfella’s pizzas and Fox’s biscuits, which has fallen 50 per cent in the past year. Investors have fled fearing an unpalatable dish of soaring input costs mixed with exposure to the cash-strapped UK.

Last month, the company gave warning of a challenging market and said that rising commodity prices and higher utility bills would add £32 million to annual costs. It has suffered in tandem with its biggest customer, Marks & Spencer, to which it supplies ready meals and sandwiches. M&S represents about a quarter of Northern’s sales and the decline in the troubled retailer’s food business is of serious concern, especially as M&S reviews its supply chain and costs.

Yesterday, the gloom for Northern’s shareholders was lifted a little after Goldman Sachs decided it was time to start buying its shares. However, the broker reduced its earnings forecast for the next two years saying that trading for the company would get even tougher as sales fall and costs rise. Despite such woeful possibilities, Goldman believes the sell-off has been overdone and that the group’s strong balance sheet and cashflows represent long-term value. Northern’s shares rose 4¾p to 60p.

The FTSE 100 added 11.7 points, climbing to 5,489.2, with traders forced to react to a range of corporate, economic and political news.

The market started the session on a solid footing after Royal Bank of Scotland, up 7½p to 240½p, reported better than expected first-half results. Investors largely shrugged off the bank’s loss of nearly £700 million, the second biggest for a British bank, just as they did on Thursday with Barclays, down 8½p to 366½p.

Oil stocks such as BP, down 12½p at 519½p, and Royal Dutch Shell A, 38p lower at £17.47, fell as crude traded around $115, although many believed the price could be much lower if not for the worsening conflict between Russia and Georgia, which could further endanger oil and gas pipelines.

Lonmin fell 18p to £34.22 after news that a number of large institutional investors such as Blackrock and Standard Life had sold their stakes in the platinum group to Xstrata, down 154p to £29.90, after its £5 billion hostile bid. Xstrata is putting together a list of potential bankers to raise funds for the deal.

British American Tobacco lost 38p to £18.38 after Richemont, the luxury goods company, and investment group Remgro, which are controlled by South Africa’s billionaire Rupert family, said they would spin off a combined 30.1 per cent stake in BAT to shareholders, ending months of bid speculation. BAT will take a secondary listing in Johannesburg to facilitate the restructuring.

WS Atkins gained 14p to 920½p despite news that Transport for London would terminate a £1.2 billion contract, held by the Transys consortium in which Atkins has a stake, to run the Oyster card system.

— New York: Shares on Wall Street rebounded sharply as a surge in the dollar and a drop in oil prices eased worries about losses at Fannie Mae, the huge mortgage finance company. The Dow Jones industrial average closed at 11,734.30 points, up 302.90.

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