Investors remained optimistic on the FTSE 100, boosting the index 2.94 per cent to close at 3,863.99.

Barclays was the biggest winner on the index, closing 22.67 per cent higher at 90.9p after announcing it would sell off part of its investment division.

The bank is keen to raise money to shore up its balance sheet through selling assets and through investments rather than give up a stake in the business to the government.

Containers and packaging group Rexam followed with a 10.66 per cent rise, while British Land Company shares rose by 9.43 per cent.

After making gains over the last few sessions, insurance stocks fell back.

Old Mutual was down by 3.55 per cent, while RSA Insurance Group dipped 2.21 per cent.

Over in the US, markets also rose on opening, with the Dow Jones up 1.78 per cent after opening and the S&P 500 up 2.01 per cent.

A rally last week saw the FTSE 100 jump 6.3 per cent over five days, as confidence returned to markets all over the world.

Anthony Grech, market strategist at IG Index, said: “The real test for the current rally – which should help figure out if this is just another false dawn – will be how it reacts to the next batch of gloomy economic data.

“This week sees figures due out of the USA on inflation and housing – if the market manages to keep its head in the face of what are expected to be fairly downbeat numbers, investors can start to hope that the first building blocks of a recovery could well be in place.”