FTSE surges after Wall Street boost

The FTSE 100 Index surged 4.8% as positive investor sentiment returned to stock markets globally. Investors were buoyed early on by a sharp recovery on Wednesday night as Wall Street's Dow Jones Industrial Average closed with a 300-point gain.

The Footsie surged as much as 273 points at one stage in a volatile week for the benchmark index - leaving it within touching distance of last Friday's close, before the turbulence began.

London's leading share index closed up 266.5 points at 5875.8, in stark contrast to the hefty falls seen earlier this week.

The latest twist came amid plans to prop up US bond insurers or "monolines" - companies which guarantee financial instruments such as the mortgage-backed bonds behind the summer credit crunch.

There have been fears that the crisis could raise doubts over the monolines' ability to pay up if bonds defaulted, meaning that banks would face more losses as the value of their bonds would take a fresh hit.

Continued optimism over the US Federal Reserve's drastic interest rate cut on Tuesday and bargain hunters also helped buoy the Dow.

A strong rally towards the end of trading in New York on Wednesday night set the tone for trading on the London market on Thursday. Even a £3.7 billion "rogue trader" loss for French bank Societe Generale failed to derail European markets.

Anthony Grech, research analyst at IG Index, said: "The big question now is whether we will continue to see further gains back above the psychological 6000 mark."

Richard Hunter, head of equities at stockbroker Hargreaves Lansdown, voiced caution that stocks are "not out of the woods yet".