By Sarah Turner

A bid by the banking sector to recoup recent losses helped U.K. shares to climb on Tuesday, with Royal Bank of Scotland shares advancing more than 15%.

Royal Bank of Scotland shares jumped 15.5% in London's top index.

In the previous session, shares in the lender slumped more than 60% after it revealed that it could be on track to post the biggest annual loss in U.K. corporate history. At the same time, additional support measures for the financial sector from the U.K. government failed to reassure jittery investors.

Still, the sector performed slightly better on Tuesday, with Barclays (BCS), up 7.8%, Standard Chartered , up 2.4%, HSBC Holdings (HBC), up 0.9% and Lloyds Banking Group , up 0.9%.

UBS upgraded Lloyds Banking Group to buy from neutral on Tuesday.

"Lloyds Banking Group's market share makes it a national champion. The combination of merger-cost saves and ability to re-price loss-leading HBOS products should put the group in an enviable position of being able to grow pre-impairment profits through the downturn," they said.

FTSE 100 up

Overall, the U.K. FTSE 100 index rose 0.7%, or 30.42 points, to 4,138.48. Other European shares climbed, while U.S. stock futures traded lower.

On Tuesday, Barack Obama takes power as the 44th U.S. president and his inauguration speech is expected to lay out an agenda for change in troubled times.

"We already have details of the $825 billion fiscal stimulus package. On some estimates the package will raise GDP by around 3-4% over the next couple of years and save or create around 3.5 million jobs. Success will crucially depend on the bank lending channel," noted economists at UBS.

The dollar gained against the pound on Tuesday, with sterling trading down 3% at $1.3950. It's the first time the currency has traded below $1.40 since July 2001.

British annual consumer price inflation saw a smaller-than-expected slowdown in December, declining to 3.1% from a reading of 4.1% in November.

Mineral extractors up, some retail relief

Mineral extractors also advanced in London, with Anglo American shares up 2.4% and Vedanta Resources shares up 4.5%.

Technology firm Invensys was among the losers, with shares down 5.6%.

The group said that its second-half results benefited from currency translation effects against sterling will be broadly in line with the first-half. Separately, the firm said it's secured a $250 million deal to develop and implement four large-scale, fully digitized nuclear control rooms for two new nuclear power plant sites in China.

In the retail sector, Burberry Group shares jumped 12.2%.

It said that its revenue in the three months to Dec. 31 rose 30%, boosted by currency moves, which was about 14% above Merrill Lynch expectations.

The firm said that markets were challenging and volatile in the period. It's aiming cut costs further and plans to restructure its Spanish operations and consolidate U.K. manufacturing.

There could be around 250 redundancies in Spain and up to 290 redundancies in the U.K.

Shares of pub operator J.D. Wetherspoon surged 14.2%. It said comparable sales in the 12 weeks to Jan. 18 rose 2.6%, an improvement on fiscal first-quarter performance when sales rose 1.5%.

"We feel consumers will become increasingly more price sensitive in 2009 and J.D. Wetherspoon is in an enviable position to take market share," noted analysts at Altium Securities.

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