Athough stocks gave back some of the day’s earlier gains by the market close, the leading index closed closed up 57.73 points or one per cent at 6,014.03.
It ended a three-day losing streak and stayed ahead of the 6,000 mark.
Banks led the gains, led by Barclays after chief executive Bob Diamond gave evidence to the Parliament Treasury Select Committee on bonuses.
Barclays closed up 5.53 per cent at 292p on news that the UK will not levy any additional taxes on the expected £7bn bonus pool and banks will instead be asked to raise business lending by ten per cent, or £20bn.
Societe Generale also issued a bullish note on the European banking sector, upgrading it to “overweight”; and Citigroup published upgraded HSBC to “buy” from “hold”, pushing shares in HSBC, Lloyds and RBS all higher.
Miners also performed well, with Kazakhmys up 3.87 per cent to 1,612.00p.
Chip-maker Arm Holdings was the FTSE 100’s biggest riser, back up after a bout of profit taking after its ground-breaking deal with Microsoft last week. It closed up 6.99 per cent to 497.50p.
Builder supplies group Wolseley gained 5.93 per cent to hit 2,179p after both Citigroup and Deutsche Bank raised their price targets, Citi’s up to 3000p. Builders merchant Travis Perkins also rose in sympathy.
Among smaller caps, Bluetooth chip specialist CSR closed far ahead as the main market’s biggest riser, up 16.01 per cent to 413p after settling a $67.5m patent infringement case brought against its subsidiary SiRF by Broadcom.
Kitchen fitter Howden Joinery also rose 10.05 per cent to 116.10p on a strong Christmas trading update.
Medical devices firm Smith & Nephew fell prey to profit takers after a share price spike yesterday on reports of a bid approach from Johnson & Johnson. It lost 5.9 per cent to close at 670p today.
Marks & Spencer also fell after its latest trading update showed group sales rose four per cent in the final quarter of 2010. While analysts’ responses were generally favourable, its cautious 2011 outlook put some investors off.
Capital Shopping Centres lost ground after Simon Property dropped its indicative bid, losing 2.75 per cent to 381.70p.
And in the FTSE 250, home furnishings retailer Dunelm fell 5.78 per cent to 497p after reporting a tough time run-up to Christmas, with its out of town retail locations hit by snow.
“After subdued trading for much of December, we have seen a return to more normal volatility this week – and this could be set to increase on Wednesday with the Portuguese bond auction and what this could mean for confidence in European sovereign states,” said Anthony Grech, head of research at IG Index.
“Markets will be only too mindful of how quickly positive sentiment evaporated in November as the Ireland situation worsened, so the next couple of days have the potential for big swings in equities.”