European stocks rallied today after renewed prospects for a bailout deal for debt-stricken Greece emerged amid reports that the country may be willing to accept creditor terms.
Greece's Prime Minister Alexis Tsipras is understood to have written a letter to creditors saying his country will back a bailout offer - but with a number of conditions.
Hopes that a deal can still be struck sent the FTSE 100 leaping 87.6 points higher to 6608.6, while the Cac 40 in France and Germany's Dax both jumped by two per cent.
But it is understood the u-turn by Greece comes with a number of amendments to the measures creditors want implemented in exchange for further bailouts, with Mr Tsipras reportedly saying he wants lower VAT and a delay in pension age.
Greece had previously rejected the bailout offer and yesterday became the first developed nation to default on an International Monetary Fund loan, missing a €1.6 billion (£1.1bn) repayment.
Today's stock market gains come after days of hefty losses, with the FTSE 100 suffering its worst month for more than three years in June after yesterday closing another 100 points lower after a two per cent tumble on Monday.
Chancellor George Osborne and Bank of England governor Mark Carney insisted they are ready to take whatever action is necessary to protect the economy as Greece has been left teetering on the brink of financial meltdown and possible exit from the euro.
The pound fell a cent against the US dollar, at 1.56, after new data said Britain's manufacturing sector grew at its slowest pace in more than two years last month. Sterling was flat against the euro, at 1.41.
Financial stocks and housebuilders were the main beneficiaries of the market rally in London, with Royal Bank of Scotland three per cent or 11.2p higher at 362.7p and builder Barratt Developments 17.5p up at 632p.
The spotlight also fell on the airline industry after the Airports Commission recommended that a new runway should be built at Heathrow rather than Gatwick.
Budget airline easyJet - which has bases at Luton and Gatwick - was a strong riser on the FTSE 100, ahead 37p to 1583p, as analysts said it would avoid the potential for disruption and higher charges at Heathrow due to expansion.
British Airways owner International Airlines Group was also higher, up 7.8p to 502.5p.
Elsewhere, tool hire company Speedy Hire saw shares fall almost one third to 49p after it made a profit warning and announced the departure of chief executive Mark Rogerson.
The Merseyside-based business, which was founded in 1977, said a slower than forecast start to its current financial year would see annual figures come in "materially " below expectations and the previous year's result.
HSS said on Monday that weak orders over the last few months from key accounts meant its six-month earnings would not top last year.
The biggest risers on the FTSE 100 Index were Royal Bank of Scotland up 11.2p at 362.7p, Merlin Entertainments up 13.5p at 440.6p, TUI up 31p at 1061p and Intercontinental Hotels up 75p at 2641p.
The biggest fallers on the FTSE 100 Index were Randgold Resources down 70p at 4215p, Tesco down 2.95p at 209.6, Antofagasta down 9p at 680.5p and Anglo American down 8.4p at 910.1p.
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