By Michael Taylor

LONDON (Reuters) - The FTSE 100 .FTSE index of leading shares ended up almost 2 percent on Monday as merger and acquisition speculation buoyed banking shares and firm U.S. crude CLc1 prices boosted heavyweight oil companies.

The blue-chip index climbed 111.0 points, or 1.9 percent, to 5,999.5 points. The benchmark index advanced 1.7 percent last week, but it is still down over 7 percent for the year on concerns over the U.S. economy.

"That is a really strong performance," said Tom Hougaard, chief market strategist at City Index Markets. "It's great we're swimming up but I have the feeling that this is not going to be over as quickly as we may like it to be."

"There are still a lot of people who are burned and who will use any chance of higher prices to offload some of their loss makers. I just wonder if we are going to get out of trouble this easy -- I don't think so."

Banks were among leading gainers as a possible rescue plan for bond insurer Ambac Financial (ABK.N: Quote, Profile, Research) eased investor concerns about troubled bond insurers.

The banking sector accounted for over 32 positive index points, on the bond insurer news and as Qatar's $60 billion (30 billion pound) sovereign wealth fund eyed investing in European banks.

Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani said in an interview that he favoured investing in European over U.S. lenders because U.S. bank stocks were likely to fall further on subprime-mortgage write downs.

Royal Bank of Scotland (RBS.L: Quote, Profile, Research) advanced 5 percent after the Sunday Telegraph said the Qatari government was considering making an investment in Britain's second biggest bank and on hope that the bank would lift its dividend and post strong results this week. RBS declined to comment.