Investors flocked back to the banking sector yesterday following speculation that the implementation of proposed new capital adequacy regulations will be delayed.

If market rumours are to be believed, this would save major banks from a potential rush to top up their capital base and give them extra time to do so in the manner that they would prefer.

Joshua Raymond, market strategist at City Index, said the pre-Christmas merriment is also rubbing off on other sectors too.

He said, ‘The banking sector is the main driver to equity markets in Europe today. We have seen investors looking to delve back into the banking sector buoyed by yesterday's weakness and by reported delays in new capital adequacy rules.

‘As we head deeper into the holiday season, investors will inevitably start to think more about what Christmas presents to buy than what stocks to pick up and this could make Indices more susceptible to that extra bit of volatility.’

Barclays performed best yesterday, closing up at 1.1 per cent at 287.7p while part-nationalised Lloyds Banking Group also rose to 55.9p.