Blue chip shares in London today soared above the 4,000-mark for the first time since February as tentative hopes that stability was returning to shell-shocked economies boosted equities around the world.

The FTSE 100 index of British blue chips rose 127 points to 4,082 in the first hour of trading, following on from strong showings in Asia and most of Europe. The last time the FTSE 100 index closed above 4,000 was 18 February.

At the same time, sterling strengthened against the dollar more than 1.2 per cent to $1.47.

Evidence from Nationwide Building Society that UK house prices rose in March for the first time in 16 months also sweetened investor sentiment in Britain and pushed bank shares higher.

At the same time, the Bank of England's Credit Conditions survey revealed that banks expect to increase lending over the next three months while the fall in activity in the construction sector also showed signs of slowing.

Earlier this week, the Bank of England revealed that the number of mortgage approvals rose by 19 per cent during February while yesterday a gauge of activity in the manufacturing sector show that the decline was showing signs of slowing.

Kevin Gardiner, global equities strategist at HSBC, said, "In the past few days we've seen data supporting the idea the economy is starting to stabilize, albeit slowly and patchily."

The slide in share values of the past few weeks was discounting a lot of bad news, he said, and traders were beginning to view the worst fears as overdone. Some bears were closing out down bets, adding to the strength of the rally.

The FTSEurofirst 300, an index of top European shares, was up 2.6 per cent at 764.38 points, on track for its third straight day of gains, helped by better-than-feared US home sales and factory data.

The German DAX and French CAC 40 indices were each up more than 3 per cent.

Earlier, Japan's Nikkei index surged more than 4 per cent while the market in Hong Kong closed 7 per cent higher.

The European Central Bank is due to meet later today and is widely expected to cut interest rates by 0.5 per cent to 1 per cent.

There is also speculation it might announce plans for unconventional policy stimulus measures such as quantitative easing already begun in the UK.

Mr Gardiner played down today's G20 meeting as an explanation for the rally, arguing that international accounting standards setters could have a bigger impact later today.

They are due to rule on whether to relax the mark-to-market accounting rules which have arguably exaggerated the banks' losses and so worsened the market fall.

A communique drafted for release at the G20 summit includes a pledge to deliver “the scale of sustained effort necessary to restore growth” without making an commitments beyond the trillions of dollars already being spent to stabilise banks, shore up demand and limit job losses.

“We think the policy effort will work,” said Bernard McAlinden, strategist at NCB Stockbrokers in London. “But there will continue to be volatility in markets.”

“Market participants are becoming more convinced of a global recovery and that is causing risk appetite to increase,” said Toru Umemoto, chief FX strategist Japan at Barclays Capital.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive