Banks propel FTSE as markets soar on eurozone deal

Markets across Europe made their biggest gains in months after investors were cheered by the eurozone’s plan to rescue the region from its ever-deepening debt crisis.

The benchmark UK index of blue-chip shares took on 2.9%, or 160 points, to 5,713, and the Mid-250 index rose 2.98%, or 311 points, to 10,733.

In Europe stock markets soared to maintain stellar gains throughout the day. Germany’s DAX index jumped 5.1% to 6,323; France's CAC 40 index added an impressive 6.1% to 3,362; and the FTSEurofirst 300 index of top European shares rose 3.55% to 1,018.

In the small hours of the morning leaders announced a package that will see bondholders agree to a voluntary 50% 'haircut' on Greek debt, the recapitalisation of some 70 European banks to the tune of €106 billion, and leveraging the EFSF – possibly to five times its current size.

The plan will also see Greece undergo a further debt restructuring, with €100 billion available from the IMF and EU.

Although markets were buoyant throughout the day commentators became increasingly concerned about the lack of detail in the eurozone package.

Michael Hewson, analyst at CMC Markets, commented: ‘The finer details still appear somewhat sketchy, certainly with regard to the EFSF, but the prospect of a contagion and a disorderly default appear to have been put to one side for the time being.

‘The only concern is that this post-deal euphoria could well leave investors with a nasty hangover when they start to look at the fine print and realise that this solution could well be another sticking plaster,’ Hewson said.

British banks soared to top of the FTSE 100 index as they were excluded from the recapitalisation plans.

Barclays (BARC.L) added 31p or 17.5%, to 210p; RBS (RBS.L) took on 2.5p, or 10% to 27.3p; and Lloyds TSB (LLOY.L) rose 2.8p, or 8.2%, to 37.07p.

But gains were seen across the board as frenzied buying followed weeks of cold trade on mining stocks amid fear about global growth.

Angus Campbell, head of sales at Capital Spreads, commented: 'It doesn’t really matter which sector did better than others because if it was an equity, in particular one of the riskier ones such as a bank or mining stock, it was bought and bought aggressively.’