Markets make strong gains


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The Independent Online

Investors returned to the stock markets today on hopes that emerging details of a eurozone rescue plan would become a reality.

London's FTSE 100 Index closed 4% higher, its highest daily percentage gain this year, while Germany's Dax and the Cac-40 in France were both 5% ahead, ending days of volatile trading.

The strong gains were led by optimism that world leaders are reportedly working on a series of emergency measures to rescue the euro, which will include pumping cash into Europe's banks.

Elsewhere, figures revealed an increase in home prices and consumer confidence in the US, which helped ease fears over a slowdown in the recovery on the other side of the Atlantic.

Michael Hewson, analyst at CMC Markets, said: "European markets have continued their gains as investors cautiously dip their toes back into the water as markets move higher on hopes rather than on expectation."

Britain's top 100 companies added £53 billion to their value today as traders bet on eurozone officials and the International Monetary Fund (IMF) agreeing on a plan to tackle the debt crisis.

The improved sentiment lifted the banking sector, with Barclays adding 8% to its value, Royal Bank of Scotland rising 6% and Lloyds Banking Group advancing 5%.

Oil prices were also lifted as fears of a global recession resided, with Brent crude in London lifting nearly 2% to 106.72 US dollars a barrel.

However, Will Hedden, sales trader at IG Index, said today's gains underlined improved European and global economic sentiment but warned the markets were not "any closer to a concrete longer term outlook".

Pumping cash into at least 16 of Europe's beleaguered banks is the cornerstone of a rumoured three-pronged plan being discussed to save the single currency.

The shoring-up of vulnerable banks would allow Greece to partly default on its debt - wiping billions of pounds from the country's balance sheet and allowing it to remain within the eurozone.

The third part of the plan involves providing additional firepower for the European Financial Stability Facility (EFSF) - the bailout fund - which could cost trillions of euros.

Meanwhile, Greek Prime Minister George Papandreou and German Chancellor Angela Merkel moved to restore investor confidence.

Mr Papandreou told a Berlin conference his debt-ridden country has "great potential" and can emerge from its deep economic and financial crisis.

Meanwhile, Ms Merkel offered to give "any possible support" to help Greece ahead of a meeting between the two leaders.

Later this week, the European Central Bank, European Commission and IMF - the troika - will head back to Athens for the latest round of talks with officials over the next tranche of its eight billion euro (£7 billion) loan instalment.

Source: PA