UK stocks climbed on a raft of company news as quarterly earnings data proved largely positive.
The FTSE 100 ended 0.7 per cent higher at 5,789.99 as banks and miners were bought widely after selling yesterday left them looking cheap.
“The FTSE 100 has lost five per cent in the last seven days of trading, with miners and the banking sector losing seven per cent and ten per cent respectively in the process,” said City Index chief market strategist Joshua Raymond.
“Naturally therefore these sharp losses in such a quick space of time have attracted bargain hunters and traders have made some tentative moves in these areas today as a result.”
Lloyds Banking Group, the worst performer yesterday, topped the risers with a 4.3 per cent gain.
Life insurer Resolution and hedge fund giant Man Group also added 2.8 per cent after losses in the previous session.
But after a strong morning’s trading, financial stocks slipped back as the stalemate among EU authorities returned to the fore.
“In the afternoon session banking shares had pared some of those gains after comments from ECB governing council member Jens Nowotny who suggested that the ECB may consider plans for a selective default on Greek bonds, in apparent contradiction to the stance of ECB President Trichet,” said CMC Markets analyst Michael Hewson.
Mining stocks also soared as appetite for commodities recovered. The sector was led by Kazakhmys, which closed up 3.9 per cent, and Antofagasta, up 3.1 per cent, as copper prices rebounded to 12 week highs.
Metals specialist Johnson Matthey jumped four per cent after reporting a 19 per cent jump in its profits, while oil and gas group Cairn Energy gained three per cent and engineering company Weir Group finished up 2.9 per cent.
But defensive stocks lost ground as riskier sectors gained – British American Tobacco fell 1.1 per cent and household goods maker Reckitt Benckiser gave up one per cent.
Intelligent software developer Autonomy fell most, down 1.6 per cent.
US markets also moved higher, boosted by IBM’s positive results released after the bell yesterday, and new data showing new housing starts hit a five-month high in June, gaining 15 per cent compared with May.
Against this however were disappointing performances by the biggest US banks, with Goldman Sachs missing earnings expectations and Bank of America posting an $8.8bn (£5.5bn) quarterly loss, its largest ever.
But Coca-Cola and Johnson & Johnson each beat earnings forecasts, and the key indices all closed at least 1.6 per cent higher.
The Dow Jones industrial average finished up 1.6 per cent at 12,587.42; the Standard & Poor's 500 Index ended 1.6 per cent higher at 1,326.72; and the Nasdaq Composite Index closed up 2.2 per cent, at 2,826.52.