FTSE 100 bounces back amid budget speech

London’s top-flight share index gained as much as 2% at one stage but closed 1.25% higher at 7026 points – recovering some of the ground lost in a heavy sell-off last week.

HSBC, the index’s second biggest company, rose almost 5% after it reported a better than expected increase in quarterly profits and brushed off immediate concerns about Brexit and US-China trade tension.

The FTSE’s gains were in line with those on the continent while US markets were flat.

But the index remains on course for a dire month having ended September at above 7,500, with investors and analysts pessimistic about company results.

Monday’s rally saw a notable upturn for financial stocks, led by HSBC, with rises of more than 3% for Barclays, Royal Bank of Scotland, Standard Chartered and Prudential.

London’s positive performance was part of a wider share surge across Europe, with car makers lifted by reports that China was considering halving the tax on car purchases.

There was also relief after ratings agency Standard & Poor decided not to downgrade its credit rating for Italian debt, lifting banking stocks in the country whose populist government is facing a budget showdown with the EU.

The rises came despite a slump of more than 3% overnight in China’s main stock index as figures showing an extended slowdown in profit growth among industrial firms added to concerns about a cooling economy.

Edward Park, investment director at Brooks Macdonald, said: “With the volatility of the last week or so, today’s stronger open to markets should not be seen as a sea change but more a pause for breath.”

Worries about Italy and the US-China trade war, as well as disappointing results from tech giants Amazon and Alphabet – the owner of Google – have been weighing on investor sentiment.