The FTSE 100 beat off some despondency to rise 1.61 per cent to 5,233.60 at 9:13 BST.

The jump followed rises in New York overnight which saw the Dow Jones climb 2.52 per cent and the Nasdaq up 3.12 per cent.

In London, some more confidence returned to banks, with Royal Bank of Scotland up 7.03 per cent and Barclays rising 5.81 per cent.

Whitbread was up 9.05 per cent, retailer Kingfisher rose 6.35 per cent and ITV climbed 6.07 per cent.

Power generator Drax was down 3.65 per cent, while Cairn Energy dropped 1.23 per cent.

Pharma giants Shire, AstraZeneca and Smith & Nephew fell 2.55 per cent, 1.73 per cent and 0.91 per cent respectively.

Today attention will turn to the states, with the release of earnings results from Merrill Lynch, JP Morgan Chase and a number of other financials.

Traders will be looking out for any signs of more write-offs with the hope the worst of the subprime-induced credit crunch fiasco is behind them.

Commenting on the pick up in prices across the Atlantic, Tom Hougaard at City Index said: “I think the whole world knew there would be a monster rally coming any time soon.

“The markets were deeply oversold and were long overdue a relief rally.”

He added much of the FTSE’s gains could be from short covering rather than fresh buying.

“Sure, there will be some bargain hunting in the beaten up stocks, but to say that the declines are over is way too early,” he concluded.