The top share index climbed higher on Monday, extending the previous session's gains on hopes European leaders were exploring more drastic methods to bring Europe's debt crisis under control.

London's blue chip index <.FTSE> rose 91.54 points, or 1.8 percent to 5,256.19 by 0921 GMT (9:21 a.m. British time), led by previously hard hit sectors such as the banks <.FTNMX8350> and miners <.FTNMX1770>, as the erratic trading of recent weeks continued.

The FTSE lost more than 7 percent of its value over nine days -- its worst losing streak since 2003 -- before snapping back on Friday.

Investors responded positively as officials said Germany and France were exploring radical actions of securing deeper and more rapid fiscal integration among euro zone countries.

They also found cheer in newspaper reports, denied by the International Monetary Fund, that Italy was in talks seeking a 600 billion euro (516 billion pound) bailout from the IMF.

The markets have found an excuse to rally after the recent fall. It's more hope than optimism, with the usual suspects (riskier stocks) leading us higher. There's still more questions than answers, a London-based trader, said.

Analysts said bailouts themselves would not solve the longer-term issue of low growth facing the euro zone and developed countries.

Darren Winder, head of strategy at Oriel Securities, said the reason 7 percent borrowing costs for Italy were more of a problem than the 14 percent borrowing costs of the 90's -- when the debt to GDP ratio was roughly the same -- was that the country's economy is not growing.

At the heart of this situation (politicians) have to find a way of making economies grow because without growth its difficult to address their fiscal situation.

Why aren't we growing as expected? If you have very little wage growth and inflation running at 4-5 percent you just aren't going to grow much, and if you don't grow much your fiscal position is the first thing that will deteriorate.

Miners, which have lost more than a quarter of their value in 2011 on worries over global growth, led Monday's FTSE bounce higher, also helped by bullish analysis from Nomura.

Eurozone debt concerns and Chinese slowdown concerns have driven sentiment and commodity volatility over the past six months. Yet, commodity prices have not collapsed, and miners are producing at capacity, Nomura said.

The diversified miners are now trading at valuations near their global financial-crisis lows, but with repaired balance sheets and growth catalysts on the horizon.

Nomura resumed coverage of BHP Billiton and Rio Tinto , each up 3.4 percent, with both stocks rated as buy. It said Rio and Xstrata , up 2.8 percent, are its preferred plays preferred among the diversified miners.

Thomson Reuters StarMine data shows Rio Tinto and BHP Billiton have average annualised per share earnings growth over the past five years of 6.9 percent and 12 percent, respectively.

Their market implied EPS compound annual growth rate, however, or the growth rates investors have priced into the stock, is minus 8 percent and minus 12.8 percent, respectively.


Upbeat broker comment helped Weir climb 5.7 percent as Barclays Capital raised its price target on the company and repeated its overweight rating.

BarCap cited three main reasons for its bullish stance on Weir; its high exposure to multi-year secular growth in shale oil & gas markets, ongoing strength in mining capex with aftermarket resilience, and balance sheet strength giving further opportunities for earnings accretive acquisitions.

The dented banking sector rallied too, with Royal Bank of Scotland and Lloyds Banking Group up as much as 5.2 percent, as the risk on trade prevailed despite concerns over the potential for harsher levies on the sector.

Britain's Treasury will increase the rate of a tax on bank balance sheets to maintain the 2.5 billion pounds ($3.9 billion)of revenue it aims to collect each year, media reports said on Saturday.

Mid cap <.FTMC> firm Thomas Cook jumped 32.5 percent after the travel firm secured a 200 million sterling funding deal from its banks, easing worries about the company's future and having shed up to 75 percent early last week.

On the downside, Randgold Resources was the only faller on the FTSE 100, after the West Africa-focussed miner cut its 2011 production target for the second time this year.

(Additional reporting by Simon Jessop; editing by Sophie Walker)