Banks drive FTSE to four-month high

Banks and miners have powered the FTSE to a four-month high in afternoon trading after the Bank of England held interest rates at their historical lows.

Shortly after 2pm, London's leading index was up 1.28%, or 69 points, to 5499 - its highest level since 4 May, with banking and mining stocks leading the upward charge.

Barclays, up nearly 6%, leads the winners' board as the banking giant shakes off the negative sentiment surrounding the appointment of Bob Diamond as chief executive.

HSBC, too, has made gains as the controversy surrounding news chairman Stephen Green is stepping down to become the government's trade minister subsides.

RBS is also amongst the afternoon's top performers with miners, including Vedanta Resources and Xstrata, completing the the leading pack.

The Bank of England's expected interest rate freeze, in addition to a cooling of fears over European sovereign debt, served to buoy investors. The positive showing, which followed overnight gains in Asia, is mirrored throughout Europe with France's Cac 40 up 1.4% and Germany's Dax up over 1%.

Meanwhile, across the Atlantic the Dow has made early gains and was up 0.62%, or 64 points, to 10451 shortly after opening on the back of upbeat economic figures. Initial unemployment claims fell by a better-than-expected 27,000 in the week to September 4 whilst the US trade deficit shrank 14%.

Financials lead the pack, with Bank of America, JP Morgan and American Express all making gains.