* Deep gloom lifts slightly
* Banks, oils strongest gainers
* Defensive pharmaceuticals stocks slide
* UK interest rates seen falling 0.5 percent next week
By Simon Falush
LONDON, Nov 27 (Reuters) - Britain's top share index ended
up 1.8 percent on Thursday as bailout hopes for the U.S. auto
sector slightly lifted the deep gloom surrounding the global
economy, boosting energy and mining stocks.
In thin trading with the U.S. closed for the Thanksgiving
holiday, the FTSE 100 closed up 73.41 points at 4,226.10 after
ending 0.4 percent lower in the previous session. The index is
up 12.2 percent on the week.
Economic sentiment in Europe's currency zone fell to a
15-year low in November and inflation expectations plunged,
reinforcing a view that there will be hefty rate cuts from the
ECB and Bank of England next week.
However, speculation that struggling U.S. automakers would
receive a government bailout eased the worst of the investor
anxiety that has plagued markets since the credit crisis struck,
and lifted equity indexes.
"Things that have gone down a lot recently are coming back,
and some people may be repositioning ahead of an expected rate
cut from the Bank of England next week," said Tineke Frikkee,
manager of the Newton Higher Income fund said.
"However fundamentally things around are getting worse in
the economy and companies are preparing for '09 to be a very
very tough year with lots of uncertainty."
Oil shares added most points to the index, with BP gaining
3.4 percent, Royal Dutch Shell rising 3.3 percent and Tullow Oil
advancing 10.2 percent.
Banks were also broadly higher with Standard Chartered
surging 11.6 percent as a rights issue was well-received by the
market, while Lloyds TSB added 2.5 percent and Barclays added
4.3 percent.
Trading on India's stock exchanges was stopped after a
series of attacks by suspected Islamist gunmen in the commercial
capital Mumbai killed at least 101 people.
Old Mutual gained 4.6 percent after the insurer said it has
scrapped the sale of its majority stake in South African general
insurer Mutual & Federal, blaming "increasingly difficult
economic conditions".
Tension among policymakers over Britain's economic woes
surfaced as the Bank of England's David Blanchflower -- known as
the arch-dove of the nine-member voting panel -- was quoted as
saying that interest rates should have come down sooner than
they did to prevent a prolonged downturn.
A Reuters poll of economists forecast that the BoE will cut
rates by at least 50 points when it meets on Thursday after it
slashed rates by an unprecedented 1.5 percentage points this
month to shore up the economy.
Two UK retailers bore the brunt of a downturn in consumer
spending, with high street icon Woolworths putting its business
into administration, and furniture chain MFI announcing the
closure of 26 of its 46 stores.
Kingfisher slid 2.4 percent after Europe's top home
improvement retailer beat forecasts with an 8.3 percent rise in
third-quarter profit but said trading conditions were tough.
Other retailers saw their share prices climb, however, after
the UK government cut value added tax by 2.5 percentage points
in a bid to boost consumer spending.
Tesco gained 3.9 percent and Marks & Spencer gained 3.2
percent as retailers rolled out aggressive discount campaigns
ahead of the Christmas shopping season.
Mid-cap DSG International dropped 10.7 percent after
Europe's second-largest electrical goods retailer swung to a
first-half loss and suspended its dividend as it grapples with
the deepening consumer downturn.
Defensive pharmaceutical stocks lost ground as investors
switched to sectors seen as higher risk. GlaxoSmithKline fell
1.2 percent, AstraZeneca slid 2.6 percent.
(Reporting by Simon Falush; Editing by David Cowell)
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