LONDON (Reuters) - The leading index of shares gained 1.4 percent early on Monday as confidence grew that the financial crisis may be easing, boosting commodity prices and energy and mining stocks.
By 8:40 a.m. the FTSE 100 .FTSE was up 58.42 points at 4,121.43 having gained 5.2 percent on Friday.
Governments around the world have pledged about $3.2 trillion to guarantee bank deposits and interbank lending and Dutch bank ING ING.AS became the latest to need government support, with Dutch authorities pumping in 10 billion euros (7.7 billion pounds).
Markets were also soothed somewhat by a pledge from European Central Bank President Jean-Claude Trichet on Sunday to do what it takes to restore confidence.
Mining stocks were firmer, recovering from recent heavy losses as metals prices bounced back from multi-year lows set last week as fears eased about the extent of the fall-off in demand.
Xstrata XTA.L, Lonmin LMI.L and Anglo American (AAL.L) gained between 1.7 and 4.7 percent.
“Ultimately stock markets are going to benefit from the measures being announced from the central banks and the government which are now acting to shore up the global economy,” said Neil Parker, market strategist at Royal Bank of Scotland.”
Energy stocks rose as oil rose over $2 per barrel on expectations that OPEC could cut output this week to lift prices which have plunged more than 50 percent from a record high in just three months.
Some banks benefited as shaky confidence on the financial sector improved slightly with the gummed up interbank lending market starting to ease.
Lloyds TSB (LLOY.L) advanced 2.6 percent and HBOS HBOS.L added 0.6 percent.
Royal Bank of Scotland (RBS.L) added 2.5 percent after the Sunday Times reported private equity firm CVC Capital Partners has teamed up with Swiss Re RUKN.VX, the world’s largest reinsurance group, to bid for a majority stake in the UK bank’s insurance assets.
Gains were tempered by Fitch Ratings on Friday downgrading ratings on Royal Bank of Scotland, citing growing risk and a deteriorating outlook for some of its main businesses.
Prudential (PRU.L) added 14.4 percent after the Sunday Times reported it is in talks with two strategic partners and is eying AIG’s Asian business.
Nerves on the state of the global economy were not far from the surface, however, as China reported below-forecast growth.
Food and drug retailers were among the fallers with Tesco (TSCO.L) losing 0.9 percent and rival supermarket group Morrison MMRW.L down 0.6 percent.
Editing by David Holmes