Market Report: Bonus for taxpayers as RBS rethinks pay plan

There was plenty of cheer for the taxpayer yesterday as Royal Bank of Scotland continued its impressive recent form and surged to the front of the FTSE 100 pack in early trading.

Although it slipped back during the day the bank, which is 84 per cent owned by the taxpayer, clearly pleased punters after backing down in a fight of remuneration over the weekend. The bank has agreed to overhaul its executive pay scheme after pressure from shareholders, which realistically means the Government. RBS will concede, at this week's annual meeting, that the share price target element of the package, which would reward the bank's chief executive, Stephen Hester, with millions of pounds in bonuses, was set too low.

The taxpayer is now well in credit with RBS, with the bank's shares having passed the golden 49.9p mark, the Treasury's initial buy-in price. The shares put on 2.25p yesterday, a 4 per cent hike, to close the day at 58.05p.

Lloyds Banking Group, the other state-backed bank, was also up yesterday. Shares in the 41 per cent taxpayer-owned Lloyds jumped 1.76p to close at 70.24p. A senior executive at the bank said yesterday that it is aiming to be one of the UK's five biggest wealth management firms within five years.

The FTSE 100 was on form, climbing 30.25 points to close at 5,753.85. Analysts at Capital Spreads argue that the confidence is largely due to the refusal last weekend of the Liberal Democrat leader, Nick Clegg, to rule out a coalition with the Conservatives after the general election, and that news from Europe was benign. "Indices have burst higher taking the FTSE 100 back up to the high 5700s once again. On the basis that there was not much bad news out over the weekend over Europeland, it is understandable that dealers will be looking towards the uplands rather than focusing any efforts on naysayers," they said.

The miners were out in force yesterday. Chilean copper miner, Antofagasta, which can trace its London listing back to the 19th century, closed the day at the top of the pile after publishing its annual report, which chronicled a successful 2009 for the company. It also benefited as the copper price continued its seemingly unending march northwards.

The stock jumped 70.5p yesterday, to close at 1,064p. The shares have put on 86 per cent in the last 12 months.

More than 10 per cent of the FTSE 100 is now made up of mining companies, and they were well represented at the top the leaderboard yesterday. Kazakh digger, Eurasian Natural Resources Corporation gained 43p, closing at 1,257p, after saying that it would spend $5.3bn (£3.4bn) on expansion plans over the next few years.

Fellow Kazakhstan miner, Kazakhmys also made it into the top 10, climbing 50p to 1,480p after agreeing a joint venture with the Chinese group Jinchuan for development of its high cost Aktogay project.

Despite yesterday being a good day for the state-owned banks and the miners, there were some blue-chip names reduced to laggard status.

BSkyB, which broadcasts Premier League football, found itself rooted to the bottom of the table, as a television pundit might say. The analysts at Jefferies cut their recommendation yesterday, saying that BSkyB's third-quarter results could be marginally disappointing based on forecasts for net subscriber additions of 57,000, which would be below the 80,000 recorded at the same stage last year. The stock fell 14p to 616p.

Imperial Tobacco's share price went up in smoke yesterday after the cigarette maker, along with several of its peers, confirmed that it would seek a judicial review of the Government's decision to ban the display of tobacco products at retailers in England, Wales and Northern Ireland. The stock fell 6p to 1,947p. Rival British American Tobacco had more spark, as its shares jumped by 7p to 2194.5p.

The news was no better for Sir Martin Sorrell's WPP, despite the chief executive of the world's biggest advertising firm saying that the industry had seen strong improvements in the key North American markets. WPP's shares fell 14.5p to 725p.

The FTSE 250 followed a similar pattern to the top board, closing up 88.54 points at 10,690.08p. The clear winner in the second division was power protection company Chloride, which rejected a $1.1bn approach from US rival Emerson, a bid that sent the shares soaring by more than 40 per cent. It ended the day at 297p, up 88p.

The engineer Weir was also among the big winners, after impressive first-half results sent the group's stock up to a 20-year high. Profits from the group were better than expected and led to a closing price of 1,017p, up 81p.

However, it was not all happiness on the FTSE 250. Britvic fell 9.7p to 485.3p, after gains of more than 6 per cent last week after a Morgan Stanley note pointed out the drinks maker's takeover attractions.

Among small caps, the outsourcing group Spice, which has suffered from a number of underperforming business units in recent months, had reason to cheer yesterday, after agreeing a deal to sell its telecoms business. And the market was impressed, with the shares climbing 4p to end the day on 41.5p.