Hopes of an imminent bailout for Spain sent global stock markets higher today as investors cheered the prospect of a more stable eurozone.

The FTSE 100 Index raced more than 1% or 64.9 points higher to 5870.5, while Wall Street's Dow Jones Industrial Average added around 120 points in early trade, buoyed also by more strong third quarter US company earnings.

There were sharp gains across Europe amid the eurozone optimism, with the Cac 40 in France up 2.4% and Germany's Dax 1.6% higher.

Spain is understood to be ready to apply for a credit line which would pave the way for the European Central Bank to start buying bonds, easing concerns over the struggling country and the wider eurozone crisis.

The speculation strengthened the euro, which left the pound down against the single currency at 1.23 euros.

But sterling held firm at 1.61 US dollars.

Banking stocks were boosted by the improved mood, with better-than-expected third quarter figures from US group Goldman Sachs adding to the gains.

Goldman said it swung to a profit after revenues more than doubled, which overshadowed the shock news that Citigroup chief executive Vikram Pandit was resigning with immediate effect.

In London, Royal Bank of Scotland rose 11.9p to 280p and Barclays added 9.25p to 246.1p.

Lloyds Banking Group rose 6% to near the top of the FTSE 100 Index amid reports the Financial Services Authority has given the green light to plans to bolster its finances by swapping assets with its Scottish Widows life insurance arm.

Lloyds, which rose 2.4p to 42.8p, would borrow around £1 billion of liquid assets held by Scottish Widows under the deal by using a larger pool of lower quality securities as collateral in a bid to boost its cash position.

Mining stocks were also encouraged by the momentum in the eurozone, which comes ahead of a summit in Brussels on Thursday, as Evraz rose 14.5p to 243.7p and Polymetal International added 34p to 1160p.

Deteriorating trends in Europe's car industry dented engineering firm GKN after it reported "some softening" in order books.

Redditch-based GKN saw its shares fall 3% or 7.1p to 204.8p as it warned challenging conditions in Europe had offset stronger demand in the US and China and in its civil aerospace division.

Outside the top flight, Sportingbet pared earlier gains to stand 0.5p higher at 53.5p after the online gamer said it would back an increased takeover offer from Britain's biggest bookmaker William Hill.

Sportingbet said it was minded to recommend the 61.1p a share offer, which values the firm at more than £400 million, to its investors.

Meanwhile, housebuilder Bellway rose 3% in the second tier after it increased its final dividend payment by 59% to 14p per share following a 57% rise in pre-tax profits to £105 million in the year to July 31. Shares were 30p higher at 980p.

This boosted rival firms, with Persimmon up 5% or 39.5p to 786p, Redrow ahead 2.9p to 158.9p, Taylor Wimpey advancing 1.8p to 58.8p and Bovis Homes adding 6.5p to 510.5p.

The biggest Footsie risers were Evraz up 14.5p to 243.7p, Lloyds Banking Group ahead 2.4p to 42.8p, Admiral 56p higher at 1175p and Royal Bank of Scotland up 11.9p to 280p.

The biggest Footsie fallers were GKN down 7.1p to 204.8p, International Consolidated Airlines Group off 2.4p to 155.6p, Capita down 6p to 733p and Intercontinental Hotels 11p lower at 1593p.