After a wild, roller-coaster week, London shares found the confidence to dismiss another day of fluctuating fortunes on Wall Street and chalk up some much-needed gains.
Driven by a revival in mining and energy stocks, the FTSE 100 climbed back above 4,000, ending the session 201.62 higher at 4,063.01. One dealer said: "That is a step forward – let us just hope we don't take a step back again next week. But in these markets who knows what is going to happen?" The FTSE 100 ended a tumultuous week 130 points higher.
BP, up 34.25 at 431.75p, and Royal Dutch Shell, up 115p at 1,350p, both helped to drive the market higher on the back of a jump in the oil price, taking it back above the $70 level as the oil cartel Opec brought forward December's meeting, increasing speculation of a cut in production levels.
The huge sell-off in mining shares, fuelled by fears of a global recession, was briefly halted as Anglo American, up 142p at 1,295p, BHP Billiton, up 84p at 895p, and Rio Tinto, up 200p at 2,250p, surged higher.
London's rise was mirrored across Europe, where markets gained 3. 7 per cent, with the French CAC 40 up 4.6 per cent and the German Dax up 3.4 per cent. But the Dow came under pressure again as official figures showed a sharper than expected fall in the number of new homes being built to a new 17-year low.
Banks limped past the finishing post after a torrid week. Royal Bank of Scot-land rose 3.6p at 68.6p, while Lloyds TSB gained 8.8p at 158.8p. But there was no respite for HBOS, due to be swallowed by Lloyds despite grave misgivings by many of its shareholders, down a further 4.1p at 80p. Barclays, the only one of the major banks to have decided against sharing in the Government bailout of £37bn, ended 7.5p higher at 221p. Standard Chartered, which has emerged virtually unscathed from the carnage, moved 65p higher at 1,082p.
Fears that the financial crisis which has crippled the banks may be spreading to the insurance sector is continuing to concern dealers. Prudential shed a further 21p to 276p, despite insisting its financial position is strong and it has no plans for a rights issue. Legal & General eased a shade to 68p, while Aviva, the country's biggest life assurance company, fell 45p to 307p.
Barrie Cornes, an analyst at Panmure Gordon, has warned that a number of key insurers will be reporting weaker sales of protection insurance sold to homeowners due to the slump in the housing market, signalling Friends Provident, unchanged at 75p, and Standard Life, off 15p at 225p, as most vulnerable.
UK property shares, already at their lowest level for five years, had to contend with more bad news when Savills, the upmarket estate agents and property consultancy, alerted investors to a possible fall in profits below analysts' expectations of £48m after a sharp reduction in the number of properties being handled not just in the UK but overseas. But the shares, after sinking 20p lower, recovered to finish 0.75p down at 220p as chief executive Jeremy Helsby pledged to cut costs.
Whitbread, which runs the Premier Inn chain and the Costa coffee shops, fell victim to a change of heart by Cazenove, which now expects the shares to underperform instead of outperform. The U-turn wiped 67p off the price at 815p. The price has now come back 22 per cent in the last month as some analysts expect bookings in its Premier Inns to suffer as people travel less. UBS has cut its price target from 1,630p to 1,350p.
The Irish housebuilder McInerney fell 2p to 21.75p as home sales slump because of lack of consumer confidence and difficulty in obtaining mortgage finance. The number of completions will now be fewer than the guidance issued to the stock market in August.
Budget airline easyJet rose 10.75p to 317p in anticipation of picking up more business after the suspension of Spanish airline LTE, which halted flights because of serious financial difficulties. The airline operates from the UK to Spanish holiday spots such as Malaga and Tenerife. Andy Harrison, the chief executive of easyJet, recently warned that the industry was poised for a "very tough" environment.
The online retailer Asos, the newly crowned AIM Company of the Year, lost 5p at 265p but is still 76 per cent up on the year. The firm, which sells copycat versions of clothes warn by celebrities at sensible prices, has warned that the run-up to Christmas is critical as half of its profits are generated in November and December.
Sci Entertainment, the interactive software developer best known for Tomb Raider, rose 23 per cent to 25p after Time Warner Entertainment lifted its holding to 16 per cent, fuelling speculation of an eventual bid.