Value of Britain’s biggest companies soar by £42bn

THE FTSE 100 Index enjoyed its best day for almost three months today as the value of Britain’s biggest companies soared

All but two of the City's blue-chip stocks powered ahead, led by a stream of heavyweights from banks to telecoms and pharmaceuticals.

Analysts said it was too early to tell if the surge marked the start of renewed market interest after recent uncertainty.

But by the close, the Footsie was up 176.1 points at 3953.4 its highest level for almost a month and the best one-day gain since July 29.

The index was on the front foot from the off but built up momentum as Wall Street opened sharply higher in early trading in New York.

David Buik, of spread betters Cantor Index, said London's gains were reflected across Europe, indicating markets may have been oversold.

He added: "This has been an amazing day. There was a feeling that the news wasn't bad enough for these indices to be languishing at the lower levels." Banks and insurers steamed to the top of the Footsie leaderboard with HSBC up 33.5p at 694.5p, Barclays up 26.75p at 426.75p.

Prudential climbed 43.5p higher to 425p, while Aviva rose 30p to 440p and Legal & General moved up 11p to 107p despite third quarter sales easing 1%.

Elsewhere investors went shopping for Sainsbury's after the supermarket giant reassured the market with its second-quarter sales figures.

Shares in the group, which have fallen 40% in the past six months, rallied 11% or 29p to 282p, while rival Tesco put on 12.75p to 207p, nearly 7%.

Oil giants BP and Shell also benefited from the buying spree with BP rising 15.5p to 427.5p and Shell moving up 13.75p to 405p.

ITV broadcasters Granada and Carlton had set the pace early on after announcing they were in the advanced stages of merger talks.

The two said they had agreed a number of points in principle with Granada likely to take a majority stake in a combined business.

Granada rose 9%, or 6p to 72.5p, while Carlton rose to the top of the FTSE 250 leaderboard, climbing almost 14% or 15.5p to 128.5p.

It was beaten to the top spot by telecoms group Spirent which soared 74%, or 4.25p to 10p as it made up ground lost after this week's profits warning.

Elsewhere among smaller stocks, Jarvis Hotels posted a near 16% climb after securing a sale and leaseback deal on nine of its biggest sites.

The group is reserving £85 million of its £150 million windfall for shareholders and its shares ended the day up 16.5p at 120.5p.

But support services firm Amey continued to suffer after reports of a de-rating of the sector and it closed down 9p at 59.5p, a fall of 13%.

In the FTSE 100, the highest climbers were Schroders NV, up 52p at 450p, Invensys, up 6.5p at 57.5p, Schroders, up 56.5p at 500p and Hilton, ahead 16.75p at 156p.

The only two blue-chip fallers were Scottish & Southern Energy, down 16p at 630.5p, and Scottish & Newcastle, down 2.5p at 522.5p.