END-OF-DAY REPORT: Shares in London ended the day significantly higher after hopes were raised that European leaders taking part in the Brussels summit would put in place a raft of measures to bolster their economies.
Before the markets opened there had been a major rally in Asia when during the night a proposal for a single supervisory mechanism for the banking system was revealed.
It will be part of a range of short-term measures to try to stabilise markets which have been hard hit by the continuing debt crisis gripping the eurozone.
The summit has agreed to use the eurozone's bailout fund to directly support struggling banks, which is a concession by Germany to Spain and Italy.
At the close, the FTSE 100 had risen 1.42% to close up 78.09 points at 5571.15. The FTSE 250 shortly before trading was completed was 265.77 points higher at 10,954.06.
Shares in the U.S. have risen sharply too following significant gains on all the major European markets during the day.
Market sentiment has also been improved by a sharp drop in Spanish bond yields as a result of agreements reached at the summit in Brussels.
Approaching the close in London, the Dow Jones Industrial Average had jumped 221 points to reach 12,823, the S&P500 was up 26 points at 1,355 and the Nasdaq Composite was 67 points higher at 2,917.
The price of WTI crude oil gained nearly 6% and stands at $82.29 a barrel.
Gold rose over 3% to $1,598 an ounce.
Despite the market improvement bank shares struggled for most of the day after a further scandal emerged.
For the last two days their shares have been hit hard by the revelations that they were involved in manipulating interest rates.
Today the Financial Services Authority (FSA) has ruled that banks mis-sold specialist insurance known as interest rate swaps tied to thousands of small businesses.
It said it had found serious failings in the sale of these products which had been designed to protect firms taking out loans against rising interest rates.
The FSA said it had reached agreement with Barclays, Royal Bank of Scotland, HSBC and Lloyds Banking Group over providing redress.
Bank of England Governor, Sir Mervyn King, has today called for a change of banking culture because in his view customers have often been treated shoddily. He said that many people in the banking system were honest and hard working but they had been let down by their leaders.
Barclays was down another 3.45p at 162.3p. Royal Bank of Scotland was initially lower and although it eventually recovered a little to go 7.7p higher at 214.1p it had not recovered its losses from earlier in the week. Lloyds Banking Group was up 1.16p at 31.1p.
Energy shares had a good day. BP rose 11.35p to 423.75p and Royal Dutch Shell was marked up 41p to 2245p. There were significant gains for Salamander Energy, up 8.4pp to 170.65p, and Heritage Oil, 5.8p higher at 122.15p. BG Group increased 50.75p to 1312.25p.
In telecommunications Vodafone was 1.3p lower at 179.5p but BT jumped 4.65p to 212.05p.
Housebuilder, Berkeley Group Holdings, which announced a 57.7% rise in pre-tax profits, gained 47p to 1412p.
Four of the other leading housebuilders saw their shares rise more than 5%. Barratt Developments jumped 8.4p to 138.6p, Taylor Wimpey rose 2.45p to 47.71p, Bellway was up 41.75p to 828.25p and Persimmon added 39.25p to 609.25p.
It was a mixed day for retailers. There was further selling of online retailer, Ocado Group, down another 2.4p to 77.1p. Tesco and Morrison were little changed but Sainsbury put on 5.85p to 301.85p and Debenham gained 1.58p to 86.53p.
The major faller of the day was Avocet Mining, dropping 55.05p to 95.75p.
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