The FTSE 100 was up 78.1 points at 4521.38 while the FTSE 250 climbed to 6686.27, up 242.56 points, at 11.46am today.

HMV was up 15.31 per cent or 15.5p at 116.75p after market rumours suggested it was planning to merge with FTSE 250-listed peer Game, which gained 14.04 per cent or 18.25p to 148.25p on the back of the speculation. Traders remained unconvinced, however, attributing the surge in share prices to a round of short covering.

Moving up

Platinum miner Lonmin, up 9.21 per cent or 102p at 1210p, was strong as the mining sector rallied. Investors continued to hunt for bargains, helping Kazakhmys, the copper producer that claimed first place on the FTSE 100 last night, gain another 9.77 per cent or 33p to 370.75p. Peers ENRC, up 5.44 per cent or 19p at 368.25p, and Xstrata, up 5.41 per cent or 63p at 1227p, were also firm.

In the banking sector, HBOS, up 7.69 per cent or 8.1p at 113.5p, traded higher amid speculation that up to two bidders were preparing to counter Lloyds TSB’s merger offer. Lloyds was up 6.42 per cent or 12.7p at 210.5p on reports that it may sell stakes in the HBOS-Lloyds combine to sovereign wealth funds and UK insurance groups in a bid to redeem the £4bn worth of government preference shares in Lloyds and HBOS as soon as possible.

Marks & Spencer was up 9.48 per cent or 21p at 242.5p after posting in-line results. Although the retailer reported a 43 per cent fall in net profit for the first half, the news was not as bad as some in the market had feared.

Weighing in on the announcement, Cazenove said: “The shares have been modestly weak ahead of today’s figures on the back of negative commentary. The lack of surprises with the figures suggests useful scope for the shares to rally.”

“Ultimately we believe that M&S has only reverted to a genuinely defensive approach to managing the business in the last few months, with some overdue attention to costs and scaling back capital expenditure. We regard the dividend as safe this year and probably next, and would see a cut as difficult to serve up without reputational damage for management given the financial largesse (i.e. heavy capital expenditure plans, the buyback and the dividend hike) displayed as recently as this time last year.”

Moving down

The Royal Bank of Scotland was the weakest on the FTSE 100, down 7.06 per cent or 4.6p at 60.6p, after it revealed fresh credit market losses. The bank also detailed the terms of government-backed £19.7bn capital raising, which will be executed via an 18 for 13 placing at 65.5p per share.

In response, Collins Stewart said: “We had RBS on a Trading Buy previously – this is now inappropriate and we are downgrading as capital levels appear lower, outlook is weaker and dividend flow more distant than peers. However, at 0.6 times new tangible book value, this is largely reflected in the valuation, so [we] only move back to Hold.”