FTSE ends higher as banks rebound

By Jon Hopkins

LONDON (Reuters) - The top share index ended 1.7 percent higher on Tuesday on hopes U.S. lawmakers would revive a $700 billion (388 billion pounds) bank rescue plan, after earlier posting its biggest monthly decline in 21 years.

The FTSE 100 .FTSE ended 83.7 points higher at 4,902.5, after hitting a session high of 4,953.4 points and falling as low as 4,671 -- its lowest level since November 2004.

The benchmark plunged 5.3 percent on Monday and has lost more than 13 percent over the month -- its biggest monthly decline since October 1987 when it tumbled 26 percent.

"We really could have had the mother of all crashes yesterday," said David Evans, market analyst at BetOnMarkets.com.

"The fact that we didn't and a floor was found not far below the lows of early September, might just indicate that there's enough in the market to keep it alive."

"However it's difficult to say if this floor was found due to speculation that a washout day would spook Congress into agreement. This belief alone may have been enough to keep markets hanging above the abyss," Evans added.

On Wall Street, U.S. stocks rose strongly, recovering from Monday's torrid performance when the Dow Jones industrial average .DJI recorded its largest-ever single-day point fall after US lawmakers rejected the bailout plan.

Markets were also boosted by stronger-than-expected U.S. consumer confidence numbers. The index rose in September to 59.8, above an expected 53.0.