POSITIVE momentum returned to the FTSE 100 Index as stocks gained on the pledge by central bankers to keep interest rates low for as long as possible.

The London market resumed its rally yesterday after a blip on Friday caused by fears that the US Federal Reserve may soon start to taper off its support for the world’s biggest economy.

But with the Bank of England and European Central Bank keen to ease investor fears about the potential for higher rates on this side of the Atlantic, the FTSE 100 Index climbed 74.5 points to 6450.1.

Germany’s Dax added 2.1 per cent and the Cac 40 in France was 1.9 per cent higher as confidence also returned to European markets.

Banking stocks were among the biggest risers on the London market amid relief the Government does not plan a tougher clampdown on leverage ratios – the measure of a lender’s capital as a percentage of its loans.

Chancellor George Osborne rejected calls for a leverage ratio of four per cent, higher than the three per cent being imposed internationally, which could have forced lenders to seek fresh funds.

Banks were also buoyed by speculation of a sale of part of the Government’s stake in Lloyds Banking Group .

Singapore’s sovereign fund Temasek is reported to be willing to buy ten per cent of the bank’s shares, while other bidders are believed to include a consortium featuring former trade minister Lord Davies.

Lloyds shares were 2.47p higher at 67.1p, a rise of 3.8%, to trade solidly above the 61.2p level at which the Government said it would break even on its 2008 bailout.

Majority state-owned Royal Bank of Scotland was the highest top tier climber, up 12.1p to 288.8p and Barclays improved by 7.1p to 298.6p.