Renewed optimism about global economic recovery lifted bank shares throughout Europe, pushing stock market indexes into gains.
The FT-SE 100 added 90 points, or 1.8%, to 5,105 points, also helped by the Bank of England's decision to keep interest rates at 0.5%. Hopes that cheap money will fuel demand for bank loans and consumption sent Lloyds Bank up 4.3%, or 2.5 pence, to 60.99p. Royal Bank of Scotland gained 1.5p, or 3.5%, 44.3p, while Barclays added 10.4p, or 3.5%, to 301.5p.
"The UK economy is still extremely fragile, and with a severe fiscal tightening on the way it is essential for monetary policy to support the recovery," said Graeme Leach, chief economist at the Institute of Directors.
The market also cheered news showing that Britain's manufacturing output grew at the fastest rate in nearly 16 years in May, following heavy downward revisions to April's numbers.
European bank shares rose, boosted by the emergence of the first details of the EU stress tests -perceived to be less tough than expected. As many as 91 European banks will be tested on their ability to resist a financial shock, and may be asked to increase their capital buffers if appropriate.
Confidence in that the tests will reassure investors over the Spanish banking system sent the price to protect $10bn of Spanish debt down by $15,000, to $232,000, an indication that investors have eased their fears about Spain following Greece into a bail-out. In Madrid, Banco Santander rose 1.4% to €9.9.
Man Group, the world's largest quoted hedge fund, said assets under management fell by 2.3% during its fiscal first quarter to $38.5bn. The shares, which have plunged by one third over the past six months, rose by 0.6%, or 1.3p, to 222.5p, as institutional investors, such as pension funds, withdrew less funds than expected. Redemptions reached $0.6bn, "the lowest absolute quarterly level for three years," the company said.
Insolvency specialist Begbies Traynor Group rose 1.2% to 60p after posting buoyant annual results, boosted by its growing number of distressed clients.
The firm, which provides administration and restructuring services, said full-year pre-tax profit from continuing operations, surged by 20% to £8.7m.
The economic recession and a drought of traditional bank lending have pushed hundreds of businesses into insolvency as they struggled to meet interest payments.
