Shares soar on eurozone deal hopes


Shares in London soared higher on hopes that politicians could hammer out a deal to ease the eurozone debt crisis by next week.

A Sunday deadline for decisive action is now unlikely to be met, but traders gambled that a second meeting of European leaders next week will deliver radical measures to shore up the region's financial system.

The FTSE 100 index jumped by almost 2% or 103 points to 5488.6, its highest closing level since early August.

Other European stock markets also rose strongly with the CAC 40 in France and the Dax in Germany rising by 2% and 3% respectively.

European financial ministers are meeting this weekend and possibly again next week. Talk of disagreement between France and Germany over terms of any plan had spooked investors but the mood changed today after reports the two countries are close to agreement on a plan to be tabled at the meetings.

That could involve an expansion of the 440 billion euro (£383.9 billion) eurozone bailout fund to well over one trillion euro to give it more firepower to lend to struggling economies and help restore confidence in banks.

Banks were among the biggest risers in London, with taxpayer-backed Lloyds and Royal Bank of Scotland up 4% and 3% respectively and Barclays gaining 6%.

Yusuf Heusen, sales trader at IG Index, said: "The market is holding quite resolutely around the 5,400 level, when arguably there could have been a strong case for simply pulling money off the table, given the uncertainty that seems to lie ahead."

But he warned that current market rises could be the "calm before the storm" because more falls are on the cards if the markets are not satisfied that any new measures will be sufficient to deal with the crisis.

Markets have fluctuated wildly in recent months amid fears that Greece and possibly other eurozone nations could default on their debts, which could trigger another banking crash and tip the world economy back into recession.

The problem has been made worse as economic growth slowed across Europe, making it harder for countries to keep up with their debt repayments and heightening fears of a default.

This weekend's meeting, which had already been delayed by a week, was initially expected to draw up comprehensive measures to solve the problem and finally restore confidence to the markets.