Britain's top share index rose early on Monday, drawing strength from gains in Asia and the U.S. on hopes of a government lifeline for the struggling U.S. auto industry and ahead of the Fed's rate decision this week.
By 0833 GMT, the FTSE 100 was up 57.16 points, or 1.3 percent, at 4,337.51 after gaining 5.7 percent last week. The UK benchmark, however, is still down nearly 33 percent for the year on concerns of a painful global recession.
Energy stocks rose along with firmer crude prices. BP advanced 2.7 percent, Royal Dutch Shell put on 1 percent, BG Group climbed 4.2 percent, Cairn Energy strengthened 4.4 percent and oil services firm John Wood Group rose 4.2 percent.
Stronger metal prices also boost heavyweight miners, with Anglo American, Eurasian Natural Resources, Kazakhmys, Xstrata, Rio Tinto and BHP Billiton up between 2.5 and 7 percent.
Rio described as speculation a British Sunday newspaper report claiming it was talking to banking advisers about a potential $9 billion rights issue in the first half of next year.
The White House said on Friday the administration would consider using part of the Treasury's $700 billion bailout package for financial institutions to keep the U.S. Big 3 automakers afloat after a bailout legislation failed in the Senate.
The U.S. Federal Reserve is set to announce its rate decision on Wednesday. Fed fund futures showed a 76 percent chance of a 75 basis point rate cut.
The economic picture in the UK remained grim. A survey by property Web site Rightmove said asking prices for homes in Britain fell in December to stand more than 10 percent below May's peak.
The chief executive of Barclays also said UK house prices were likely to fall between 10 to 15 percent next year and the unemployment rate may top 7 percent. "Given the significance of the topline economic data releases, most investors are going to play their cards pretty close to their chest," said Jeremy Batstone-Carr, head of private client research at Charles Stanley. "I expect that probably fund managers have drawn their line under a diabolical year."
"But just when they thought it might be safe to peek over the parapet, (Bernard) Madoff came along and completely screwed them again, so 2008 is an absolutely annus horribilis for the fund management industry," he said, referring to Wall Street trader Bernard Madoff's alleged $50 billion fraud.
In the banking sector, Barclays, Royal Bank of Scotland, HBOS, Lloyds TSB and Standard Chartered put on 0.9 to 6.7 percent.
HSBC, however, shed 1.5 percent after the Financial Times reported that HSBC had emerged as one of the largest victims of the alleged Madoff fraud, with potential exposure of about $1 billion. HSBC could not immediately be reached for comment.
Royal Bank of Scotland and Man Group both said they had lost money in the Madoff scandal.
Man Group was up 0.3 percent.
Retailers were also in demand despite employee-owned retailer John Lewis reporting a drop in weekly sales in its department stores in the runup to Christmas and saying it was not expecting to top its record annual sales of 2007.
Marks & Spencer added 0.7 percent, Next put on 0.5 percent and Kingfisher tacked on 0.4 percent, while grocers Tesco and Sainsbury were up 0.3 and 0.9 percent, respectively.
Liberty International rose 3.3 percent. The Daily Telegraph said the property company was examining fundraising options including a rights issue to bolster its balance sheet.
Drax sagged 2.5 percent after RBS cut its price target on the stock.
