BLUE-CHIP shares surged as a surprise cut in Chinese interest rates provided a major boost to mining stocks.

China's rate cut, the first reduction in two years, came after growth in the world's second-largest economy slowed to a five-year low of 7.3 per cent in the last quarter.

Hopes for improved Chinese demand meant commodity-based stocks dominated the risers' board of the FTSE 100 Index, which closed more than one per cent ahead, up 71.9 points to 6750.8, at the end of a largely positive week for investors.

The rally came as European Central Bank president Mario Draghi pledged to bring the eurozone's low inflation rate back to target "without delay". His comments put pressure on the euro as it signalled Mr Draghi will widen bond purchases to include corporate or government bonds in an effort to pump new money into the financial system.

European markets were lifted by the developments in Europe and China as the Dax in Frankfurt and Cac40 in Paris were both up by nearly three per cent.

As the price of Brent crude crept back to around the 80 US dollars a barrel mark, shares in Tullow Oil rose six per cent, or 27.7p to 505p and Royal Dutch Shell added 38p to 2391p while BP climbed 6.8p to 448.2p.

Among miners, Anglo American surged seven per cent or 86.5p to 1380p and Rio Tinto improved 177p to 3042p, or six per cent.

Meanwhile, Royal Bank of Scotland headed lower after it admitted a miscalculation meant it had only just passed a European stress test of its balance sheet. The test, designed to see if banks could withstand another major financial crisis, required banks to meet a capital buffer threshold of at least 5.5 per cent under the stress scenario.

Results last month showed RBS passing the test with a level of 6.7 per cent but it has now disclosed the figure should have been 5.7 per cent. Shares fell 2.9p to 377.7p.

Elsewhere, risers included Rolls-Royce after the engines giant secured an order from Delta Air Lines worth £3.2 billion to power 50 Airbus planes.

The deal lifted Rolls shares by 9.5p to 853.5p after a difficult few weeks in which it has announced plans for 2,600 job cuts and admitted it is unlikely to grow profits in this year or next.

Troubled outsourcing firm Serco fell five per cent in the FTSE 250 Index after Credit Suisse downgraded the stock and slashed its price target. New chief executive Rupert Soames warned earlier this month that Serco faced two more difficult years as it battles to rectify the mistakes of the past. Shares were 9p lower at 170p.

The biggest FTSE 100 risers were Anglo American, up 86.5p at 1380p, Rio Tinto up 177p at 3042p, Tullow Oil up 27.7p at 505p and Fresnillo up 38.5p at 763.5p.

The biggest fallers were Imperial Tobacco down 39p at 2885p, TUI Travel down 3.7p at 423.4p, Carnival down 21p at 2617p and easyJet down 12p at 1553p.