THE highly volatile stock market experienced soaring shares yesterday as hopes rose of a rescue plan for the crisis-hit eurozone.

The FTSE-100 share index closed 205 points, or 4%, higher at 5295, its biggest one-day gain since May 2010. More than £53 billion was added to the index.

A surge in banking stocks helped Germany’s Dax rise by more than 5% and France’s CAC 40 by almost 6%.

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The current optimism of a breakthrough is based more on hope than a concrete plan and, while shares rose yesterday, analysts expect more volatility in the run-in to November 3 when world leaders are expected to finalise a plan at the G20 summit in Cannes. US President Barack Obama has said the eurozone crisis “is scaring the world”.

Keith Bowman, a market analyst, warned the rise in share prices could be shortlived. He said: “The optimists have taken the forefront on hopes we could see European politicians getting to grips with the current situation over the coming weeks. But there are still a lot of concerns. Investors remain sceptical about the success of the measures being planned to resolve the eurozone credit crisis.”

Although European Union officials maintain no eurozone deal has been struck, sources out of Washington, where the IMF is based, have sketched out a three-point plan, involving a 50% write-off of Greek debt, leveraging up to $2 trillion for a eurozone bailout fund, the European Financial Stability Facility (EFSF), and recapitalising banks to strengthen them in the event of any default.

Lorenzo Bini Smaghi, a board member of the European Central Bank, fuelled expectations of a larger bailout pool by saying policy-makers were indeed working on “how to leverage the money out of the EFSF in a more innovative and efficient way”.

In Berlin, it seems certain Angela Merkel, the German Chancellor, will tomorrow get enough votes in the Bundestag to approve crucial reforms to the eurozone bailout fund albeit on the back of support from opposition politicians.

Yesterday, German Finance Minister Wolfgang Schaeuble sought to allay the fears of his eurosceptic colleagues by denying any increase to the EFSF was planned. “We do not intend to increase it,” he insisted.

Some analysts noted how, technically, this was not a denial the fund could be leveraged up to raise more money. What worries German MPs is someone will have to pay for the increased fund, ie German taxpayers.

Last night, Mrs Merkel was due to meet George Papandreou, the Greek Prime Minister, after he promised German industrialists Greece would meet its commitments under the EU/IMF rescue programme despite having already missed key fiscal targets. “I can guarantee Greece will live up to all its commitments,” declared Mr Papandreou.

Mrs Merkel, at the same forum, said: “We will provide all the help desired from the German side so Greece regains trust.”