Global markets have rallied on Monday as hopes were raised that the US fiscal cliff package of automatic tax increases and spending cuts can be avoided.
At close, the FTSE 100 was up 2.4 per cent to stand at 5737.66, with Barclays making the biggest gain in the blue chip index having seen its shares rise by 6.6 per cent.
Markets across Europe also rallied with the French Cac 40 and the German Dax up 2.9 and 2.5 per cent, respectively. The FTSEurofirst also rose 2.2 per cent.
Hopes were raised after congressional talks in which Republicans and Democrats both appeared willing to compromise over budgets to tackle the US fiscal cliff. John Boehner, the Republican speaker of the House of Representatives, and Mitch McConnell, the top Senate Republican, both said they had put extra revenues on the table adding the tone was markedly different to previous meetings.
Wall Street added further impetus to the rally when it opened. At 17.09 BST, the Dow Jones was up 1.2 per cent, while the Nasdaq rose 1.6 per cent.
Asian shares also rose earlier today on the back of renewed hopes. The Nikkei 225 in Japan was up 1.4 per cent at close, while the Hong Kong Hang Seng index rose by 0.5 per cent.
Risk assets such as oil were on the rise as conflicts in the Middle East continued to escalate. The Brent Crude futures index was up 2.7 per cent, while other commodities also increased.
The FTSE 100 fell 2.8 per cent last week as concerns were raised about the US fiscal cliff as well as continued eurozone unrest. The blue-chip index closed at its lowest level in four months on Friday.