London equity markets regained some ground, bouncing from a five-and-a-half-year low on Friday after overnight gains on Wall Street.

After its worst two-day performance since the stock market crash of 1987, the FTSE 100 climbed 4.3 per cent to 4,028.2, a rise of 167 points. The FTSE 250 mid-cap index rose 2.9 per cent to 6,527.8.

This followed Wall Street's impressive late rally, which traders attributed to a combination of bargain hunting and rumours of bail-out plans being extended to bond insurers. The Dow Jones Industrial Average climbed 4.7 per cent, while the S&P 500 gained 4.3 per cent.

In Asia, stock markets also recouped some of the losses given up earlier in the week. The Nikkei 225 gained 2.1 per cent to 8,632.17 but Hang Seng was flat.

Bargain hunting was evident in London as the miners and oil producers, among the most severely sold off sectors during the previous two session, were both higher.

Oil stocks were also supported by climbing crude prices, which ticked back above $70 a barrel. Tullow Oil rose 8.4 per cent to 495p, Royal Dutch Shell gained 7 per cent to £13.21 and BP climbed 5.7 per cent to 420p.

Among the miners, Anglo American clawed back 7.3 per cent to £12.38 and Eurasian Natural Resources bounced 10.6 per cent to 400p.

The battered banking sector also regained some ground. Barclays climbed 3.5 per cent to 221p, Standard Chartered added 5.8 per cent to £10.76 and Royal Bank of Scotland rose 3.9 per cent to 67.4p. Lloyds TSB rose 7.4 per cent to 161p, but its merger partner HBOS fell 1.1 per cent to 83.2p.