A flurry of deals set the City buzzing today, while powerful gains on European markets gave dealers plenty of reasons to be optimistic.

The FTSE 100 Index powered ahead in the opening minutes, gaining 106.9 points to 5324.

Banks and insurance groups led the charge, driving the FTSE forward despite falls in New York and the Far East in previous sessions.

Schroders gained 90p to £11.33, Bank of Scotland jumped 27p to 618p and Legal & General gained 27p to 689p.

Banking analysts welcomed news of a merger on the other side of the Irish Sea as Irish Life and Irish Permanent confirmed they were in talks.

The combined group would be Ireland's third biggest bank but would dash Abbey National's rumoured hopes of taking over Irish Permanent.

Irish Life jumped 35p to 500p and Irish Permanent leapt 65p to 842.5p.

Abbey National was swept along with the FTSE tide, gaining 16p to £11.50.

Distributer Booker announced a further stage in its bid to focus down to food distribution with the sale of its fish processing operations for £47.5m.

Shares gained a penny to 125p. Retailer Kingfisher announced a £750m push into the DIY market, driving shares up 4p to 518p.

The move is expected to create 20,000 jobs.