FTSE: 5,903.50 (+49.68) Mid-250: 11,717.85 (+16.37) Small Cap: 3,265.22 (+6.53)STOCKS IN London were driven higher in late trade yesterday as investors picked over details in a statement of the EU's emergency summit with raised hopes that action would be taken soon to address the debt crisis.

Banks jumped on hopes that European leaders would manage to reach agreement on a new rescue package for Greece after France and Germany appeared to settle their differences.

Manoj Ladwa, senior trader at ETX Capital, said “The last two days have seen a small rise in equities as traders wagered on EU finance ministers taking one step towards solving their sovereign debt issues. But this mini-rally seems to have run out of steam this morning as traders move to the sidelines ahead of any announcement.”

Financial stocks received more of a boost from news that as part of the deal between Berlin and Paris, President Sarkozy agreed to drop a plan for a €50 billion bank tax to help fund a €115 billion Greek bailout.

FTSE 100 was driven 0.9 per cent higher as bank stocks soared after a draft statement from the EU summit on euro zone bailouts was picked over by investors.

Barclays jumped 3.6 per cent to 230.7p, HSBC climbed 0.9 per cent to 611p, Lloyds Banking added 5.8 per cent to 47.5p and Royal Bank of Scotland soared 6.2 per cent to 36.2p.

Better-received news from the retail sector provided some relief in London, as the wider market started to take on a defensive feel.

Banks also extended their gains as traders welcomed the latest twists and turns of a likely deal between euro zone politicians on a new bailout for Greece, which included hopes that French plans to levy a tax on the sector would be dropped.

Kingfisher, the owner of the BQ and Screwfix home improvement chains, was high on the FTSE 100 leaderboard after its group wide like for like sales fell by less than feared, softening by 0.5 per cent in the second quarter. Its shares rose 5.5 per cent to 267.07p.

In the wider sector, Home Retail, the owner of Argos, was 2.1 per cent higher at 139.6p. Next ticked 1.1 per cent better to £24.24. Debenhams, a department store chain, added 0.8 per cent to 65.7p.

The best single gain came for AstraZeneca which rose 1.9 per cent to £30.89. – (Copyright The Financial Times Limited 2011)