The top share index gained nearly 2 percent on Tuesday, led by a rebound in banking stocks after a well-covered Spanish bill auction eased some concerns about banks' exposure to euro zone debt.

Barclays was the top sector performer, rallying 4.6 percent after BofA Merrill Lynch said earnings upgrades could be on the horizon for the UK lender.

With euro zone fears hitting the shares recently, we think the Q1 results could re-focus investors to the fundamental attractions of Barclays, BofA ML said in a note.

The FTSE 100 index <.FTSE> closed up 100.67 points, or 1.8 percent at 5,766.95, just below the level it started April after a roller-coaster ride so far this month.

Having pushed back to the levels seen at the beginning of April, the question is now whether markets can regain lost ground, or whether the euro zone crisis is strong enough to drag us back downward, said Yusuf Heusen, sales trader at IG Index.

Banks <.FTNMX0530> drew support from a slight easing in concerns over the euro zone debt situation after an auction of Spanish 12 and 18-month bills saw strong demand, although yields rose and Thursday's more important 10-year Spanish debt auction was more keenly awaited.

Fairly upbeat comments from the International Monetary Fund (IMF), in its latest World Economic Outlook, also provided a lift for equities.

Global growth is slowly improving as recovery in the United States gains traction, but risks remain elevated, the IMF said.

Certainly, with the IMF sounding more positive on the outlook for the global economy, the bulls seem to have the upper hand once again, even if investors aren't exactly rushing from their safe havens just yet, said IG's Heusen.

U.S. blue chips <.DJI> benefited from the upbeat IMF comment, gaining 1.3 percent by London's close, with the Spanish bill auction and above-forecast earnings from Goldman Sachs and Coca Cola also supportive.

Strategists at Nomura maintained a bullish outlook for European equities in their latest review.

An interesting feature of the past month has been the sharply increased willingness of investors to discriminate between European countries and stocks, they said in a note.

This should be encouraging for active managers as it provides the ability to add value, as opposed to the highly correlated moves of last year, the strategists added.

VODAFONE BOOST

Market heavyweight Vodafone added nearly 5 points to the blue chip index, with the stock gaining 1.5 percent as the mobile telecoms operator said it had served the Indian government with a notice of dispute regarding India's proposal to retrospectively tax overseas transactions.

Heavyweight commodity issues were also higher, with integrated oils supported by a firmer crude price, while a tick-up in copper prices helped miners <.FTNMX1770> recover from early falls.

Precious metal miner Randgold Resources , however, fell 1.1 percent as the gold price edged lower,

Burberry Group was the top FTSE 100 loser, tumbling 5.9 percent on profit taking after the luxury goods firm met forecasts with an 18 percent rise in second half sales. Merchant Securities cut its rating for Burberry to hold from buy on valuation grounds.

Retailer Marks & Spencer was also weak after a trading update, falling 2.5 percent as underlying fourth-quarter sales missed forecasts, with growth in food sales failing to offset a weaker outcome in general merchandise.

UK consumer price inflation inched up to 3.5 percent in March from 3.4 percent in February, as expected, driven by rises in food and clothing prices.

(Editing by Susan Fenton)