London stocks rose more than 1% on Tuesday, led by gains in lenders after fears of a banking crisis appeared to ease, while the focus shifted to the US Federal Reserve ahead of its rate-setting meeting.
The blue-chip FTSE 100 (.FTSE) rose 1.3%, extending gains from Monday when it advanced nearly 1%.
Fears of a global banking meltdown looked to ease after Swiss lender UBS (UBSG.S) agreed to buy its beleaguered rival Credit Suisse (CSGN.S) for $3.23 billion over the weekend.
"Investors at this point in time feel comforted with how this mini banking crisis is being handled," said Craig Erlam, senior market analyst at Oanda.
British banks (.FTNMX301010) climbed 2.4% with the index on track for its best day in nearly three months.
Barclays (BARC.L) was among the top gainers, rising 4.8%.
Weakness in the pound also aided the exporter-heavy FTSE 100.
Investor focus would now shift towards the
US Federal Reserve's upcoming interest rate decision as the two-day monetary policy meeting begins later today.
Recent turmoil in the banking sector sparked by the collapse of two regional
US banks coupled with troubles at European lender Credit Suisse prompted investors to sharply re-adjust their expectations around interest rate hikes.
The FTSE 100 has erased most of its early yearly gains, with the index now up only 0.5% on the year, due to the recent volatility.
Investors would be looking out for February UK inflation data due Wednesday, the final pit stop to gauge the state of the economy before the Bank of England's decision on monetary policy tightening due Thursday.
The more domestically-focussed FTSE 250 midcap index (.FTMC) also added 1.5%.
Kingfisher (KGF.L) rose 0.4% after the home improvement retailer's annual profit beat market expectations.
Meanwhile, data showed Britain recorded the largest budget deficit for any February since at least 1993 when monthly records started.
Finance Minister Jeremy Hunt will be speaking to the Economic Affairs Committee later in the day after delivering his budget last week.
Reuters