The FTSE rose 97 points, or 1.65%, to 5985.5p this morning as Alliance & Leicester led gains.
The bank rose 39 points, or 7.65%, to 549p on news it has become a takeover target for Lloyds TSB.
Meanwhile, Royal Bank of Scotland rose 27.25 points, or 7.21%, to 405.25p.
Associated British Foods fell 29.5 points, or 3.37%, to 847p despite promising “good growth” ahead of its March trading update.
Tullow Oil fell 10 points, or 1.61%, to 613p following news it has encountered drilling delays.
The Dow Jones rose 96.72 points, or 0.79%, to 12381.02c as American International Group rose 1.29 points, or 2.71%, to 48.88c. Verizon Communications rose 0.84 points, or 2.38%, to 36.20c.
Intel Corporation fell 0.48 points, or 2.36%, to 19.82c while Microsoft Corporation fell 0.42 points, or 1.49%, to 27.68c.
The Nikkei rose 3.1% to 13,914.57 yen at the close of trading.
Motor insurer Aioi rose 14% to 513 yen while general insurer Mitsui Sumitomo Insurance Co. rose 10% to 1,107 yen.
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