Banks and commodity stocks powered the FTSE 100 higher by midday on Thursday as news of a deal to tackle Europe's debt crisis provided an adrenalin shot for investors.

BofA Merrill Lynch advised caution at least until more details emerge.

More was achieved than looked to be the case earlier in the evening, but we would caution that some of the implementation, to be rolled out over the next six months or so, is short on detail and will have to be watched carefully.

Euro zone leaders struck a deal with private banks and insurers for them to accept a 50 percent loss on their Greek government bonds, lightening Greece's debt burden in an attempt to contain the debt crisis.

The crisis has already hit corporate earnings. Of the 33 European companies that have reported third-quarter results so far, 58 percent have come in below market expectations. Meanwhile the deal does not remove the questionmarks hanging over banks' financial health.

European bank recapitalisation remains an aspiration rather than a reality, Ian Gordon, analyst at Evolution securities said.

It is crystal clear that the Europeans have no intention of ever signing up to the sheer excess that the UK regulatory nutters foist upon our own banks. UK banks are well above the fray and will remain so.

Despite the concerns the deal has boosted confidence that there is support for financials and politicians are keen to do what it takes to prevent the collapse of the banking system.

Among the top risers, Barclays rose 10.9 percent leading the banks <.FTNMX8350> higher, and Aviva up 7.3 percent headed a strong performance by the insurers <.SXIP>.

On the 25th anniversary of the big bang, London's Blue Chip index <.FTSE> rose 136.17 points, or 2.5 percent to 5,689.41 by 11:47 a.m. British time.


Commodity issues saw strong demand as investors moved back into riskier assets, with crude oil gaining more than 2 percent, copper also up over 2 percent, and gold hitting a one-month high.

Royal Dutch Shell was the top energy gainer, up 2.0 percent, after the firm reported a doubling in third-quarter net profit, thanks to higher oil prices.

Today marks the 25th anniversary of Big Bang, a transformational event for the City of London. One market adage which predates even that milestone is Never sell Shell. Today's update is a timely reminder why this is still the case, said Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers.

Miners <.FTNMX1770> were the top performing sector as it is hoped the deal in Europe would spur growth in the region, which had all but stagnated, and improve the outlook for demand.

Kazakhmys rose 7.5 percent after saying it was on track to meet its full-year target.

Defensive stocks, which had led the index higher on Wednesday as nervous investors turned to stocks seen as a shelter for their investments in case a deal could not be reached in Europe, inevitably fell back.

Drugmaker AstraZeneca fell 0.2 percent after its third-quarter results failed to excite investors as the company raised earnings forecasts, but analysts said the market had been anticipating higher EPS due to foreign exchange effects.

Peers GlaxoSmithKline and Shire , which reports on Friday, fell as much as 1 percent, while other defensives including utility National Grid and British American Tobacco shed up to 0.6 percent.

U.S. equity futures pointed to a sharply higher open on Wall Street, in line with gains across Europe, and ahead of the final reading for U.S. third quarter real GDP, due at 1230 GMT.

A rise of 2.5 percent forecast, up from 1.3 percent in the previous quarter, while a miss could see gains pared particularly after recent data undershot expectations raising concerns over the health of the World's biggest economy.

U.S. weekly initial jobless claims will also be released at 1:30 p.m., with September pending home sales scheduled for 3 p.m..