An upwards revision to US economic growth estimates prompted an afternoon rally in London, with markets extending gains after some dovish comments from central bankers in the US and Europe.
Concerns about a recession in the States proved premature, as the initial estimate of a 0.1% contraction in US fourth-quarter gross domestic product (GDP) was revised higher to 0.1% growth.
"A recession in the first quarter of 2013, if there was ever really a risk of one, is off the table now, and the third and final revision is likely to be higher again," said Market Analyst Craig Erlam from Alpari.
"The consensus in the market was that the figure would be revised up to 0.5% today and the reaction following the release suggests that hasn't changed, but we may have to wait for the final figure next month."
Markets were also given a boost by US jobless claims which came in lower than expected and a better-than-forecast reading of manufacturing activity in Chicago.
Traders have more or less shrugged off the so-called 'sequester', the $85bn of automatic budget cuts that come into effect in the US tomorrow. The White House is said to be engaging in a "construction discussion" with congressional leaders about how to avert the cuts, but no major breakthrough is expected.
Stocks gain as central banks back stimulus
Speaking to Senate's Banking Committee on Capitol Hill over the last two days, US Federal Reserve Chairman Ben Bernanke defended the Fed's asset purchase programme, saying that it was necessary until the job market improves substantially. He allayed fears that the central bank could start to scale down quantitative easing measures.
His dovish comments were echoed by Mario Draghi, the President of the European Central Bank (ECB), who said that the ECB would not tighten monetary policy with inflation expected to stay well below the 2.0% target near term. He said that policy makers are "far" from exiting stimulus measures.
Meanwhile, speculation about an ECB rate cut ramped up today after Eurozone CPI inflation fell to the ECB's target of 2.0% in January.
Markets across Europe reacted by pushing firmly into positive territory in the morning session, though sentiment is still fragile in the wake of the inconclusive Italian elections at the weekend, which saw anti-austerity parties secure a surprising portion of the vote.
FTSE 100: IAG flying high; Kazakhmys plummets
British Airways owner IAG soared as its operating loss of €107m for 2012 was better than the company's guidance in November of €120m.
Copper giant Kazakhmys was heading the other day, dropping nearly 9.0% after saying that it would be slashing its dividend for 2012 to reflect falling profits. The company also said that its CFO would step down in May, when its Chairman is also due to retire.
Other mining stocks were also lower as metals prices slipped: ENRC, Randgold, Antofagasta and Anglo American were registering steep losses.
UK lender RBS slumped nearly 7.0% despite core operating profits coming in ahead of expectations. CEO Stephen Hester said that there was "important work still to do" as the the bank continued to be hit by fines from mis-selling products and rate-rigging scandals.
Utilities group National Grid was a high riser after agreeing to all of the UK RIIO price-control arrangements with regulator Ofgem, which it hopes will deliver further shareholder value.
Media stocks were performing well today: Reed Elsevier gained after reporting a rise in revenues for 2012; ITV was lifted by a ratings upgrade from Westhouse Securities; while WPP rose ahead of its full-year results tomorrow.
Meanwhile, outsourcing firm Capita fell despite reporting a solid 14% increase in revenue in 2012,while underlying operating profit gained 10%.
FTSE 250: Howden Joinery and National Express jump in morning trade
Howden Joinery beefed up annual earnings and underlined its confidence in future trading with a six-fold increase in its full-year dividend. Howden, whose products are predominantly sold to small local builders for installation in public and private housing, said group revenue rose to £887.1m from £853.8m in 2011.
Tranpsort group National Express was also a high riser after cheering investors with news of cost savings and an increased total dividend for 2012.
UK-based telecommunications company Spirent Communications plunged after the company reported flat 2012 revenues and a fall in pre-tax profits.
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 239.20p +7.89%
ITV (ITV) 124.20p +4.37%
GKN (GKN) 273.00p +3.33%
Standard Life (SL.) 352.50p +3.10%
Whitbread (WTB) 2,523.00p +2.81%
Hargreaves Lansdown (HL.) 867.00p +2.12%
WPP (WPP) 1,054.00p +2.03%
Diageo (DGE) 1,980.00p +1.80%
Resolution Ltd. (RSL) 261.20p +1.75%
Land Securities Group (LAND) 829.50p +1.72%
FTSE 100 - Fallers
Kazakhmys (KAZ) 619.00p -8.57%
Royal Bank of Scotland Group (RBS) 323.90p -6.60%
Capita (CPI) 823.50p -2.89%
Petrofac Ltd. (PFC) 1,454.00p -2.87%
Randgold Resources Ltd. (RRS) 5,485.00p -2.58%
Eurasian Natural Resources Corp. (ENRC) 338.40p -2.48%
Antofagasta (ANTO) 1,093.00p -1.97%
Shire Plc (SHP) 2,065.00p -1.76%
Anglo American (AAL) 1,922.00p -1.56%
Polymetal International (POLY) 999.00p -1.38%
FTSE 250 - Risers
National Express Group (NEX) 220.00p +12.65%
Howden Joinery Group (HWDN) 214.00p +12.39%
COLT Group SA (COLT) 130.10p +5.34%
Capital & Counties Properties (CAPC) 265.10p +5.03%
BBA Aviation (BBA) 255.30p +3.91%
Derwent London (DLN) 2,203.00p +3.48%
Domino's Pizza Group (DOM) 537.00p +3.47%
Lonmin (LMI) 357.00p +3.42%
Henderson Group (HGG) 158.80p +3.18%
Ocado Group (OCDO) 131.40p +2.98%
FTSE 250 - Fallers
Spirent Communications (SPT) 153.50p -7.42%
Ferrexpo (FXPO) 227.70p -5.36%
Kier Group (KIE) 1,287.00p -4.38%
KCOM Group (KCOM) 76.45p -3.29%
Man Group (EMG) 100.30p -2.62%
Centamin (DI) (CEY) 53.70p -2.36%
Chemring Group (CHG) 277.00p -1.98%
African Barrick Gold (ABG) 262.80p -1.94%
Petropavlovsk (POG) 301.80p -1.76%
Pace (PIC) 233.20p -1.73%