The FTSE 100 index sparked into life today as banks and builders recovered from last week's slump amid tentative signs that the worst of the global financial turmoil could be drawing to a close.

Investors followed the lead of the HBOS directors who spent a collective £6 million on the bank's shares last week, and shares in the company behind the Halifax rose 63½p to 537p. HBOS claimed it was the victim of rogue traders who had spread false rumours about its health, forcing the shares sharply and prompting panic.

Details of the directors' share purchases, published today, revealed that chief executive Andy Hornby and the rest will get an "enhancement" to their bonuses if they hold the stock they have just bought for at least three years.

The Footsie had seemed to be in freefall since the end of February, slumping through the 6000 mark and dropping almost 10% in three weeks.

After the four-day Easter weekend break, the FTSE 100 index leapt 184.9 points, or 3.3%, to 5680.1 after hitting a near-18-month low at the Maundy Thursday close. But trading was relatively thin, suggesting it is premature to say the bull market has returned.

The biggest share rises in more than a month were led by the banking sector as traders cheered news that a rescue of Bear Stearns appears more assured after JPMorgan Chase increased its offer fivefold to $10 a share, valuing the stricken investment bank at about $2 billion (£1.01 billion).

Builders Taylor Wimpey, up 20.5p at 184.3p, and Wolseley, 53½p ahead at 553½p, also benefited from the shift in sentiment.

Stock markets around the world rallied overnight amid hopes the crisis is bottoming out. There was a 5% jump in the Hang Seng index in Hong Kong, a near-4% rise in the ASX index in Sydney and a 2% gain in the Nikkei Average in Tokyo. The pan-regional MSCI Asia Pacific index posted its largest advance since Valentine's Day, climbing by more than 3%.

In Sydney, Macquarie Bank rebounded 12% from recent falls while Commonwealth Bank of Australia surged 8%. In Shanghai, shares in Industrial and Commercial Bank of China, the world's largest bank by market capitalisation, put on more than 5.5%.

Traders said news of an unexpected rise in sales of existing homes in the US helped to bolster market sentiment, which improved further when it became apparent that JPMorgan was moving to shore up its rescue of Bear Stearns.

They added that the increased offer for Bear had led to a re-evaluation of the sell-off in the financial sector, and was preferable to weeks of uncertainty over whether JPMorgan would go through with the deal.

JPMorgan chief executive Jamie Dimon said the bank had raised its offer to close the deal more quickly and to ensure Bear Stearns' top people would not leave in a mass defection.

Many of Bear Stearns' leading moneymakers are paid, at least in part, in the bank's stock, which the terms of the initial JPMorgan offer had rendered next to worthless.