The London market ended the week in positive territory after growing hopes that last-ditch reform proposals by Greece will lead to a bailout deal with its creditors.
French Prime Minister Manuel Valls described the new proposals as “solid, serious and complete”.
The FTSE 100 Index rose 91.8 points to 6673.4, meaning blue-chip shares ended the week 87.6 points up as the chances increased of Greece agreeing a last-minute deal and preventing its exit from the euro.
It came at the end of a turbulent week for the top-flight which saw it shed more than 150 points in the first couple of sessions after a Greek referendum vote to reject the kind of measures that could have paved the way for a new bail-out for the indebted nation.
But increasing optimism that agreement may be reached has meant the FTSE 100 finished well above the closing mark of 6585.8 seen last Friday.
Germany’s Dax and France’s Cac 40 were up sharply today too.
Investors were also breathing a sigh of relief over events in China as an intervention by Beijing’s government appeared to have been enough to arrest a stock market meltdown in the world’s second biggest economy.
Shanghai’s Composite Index rose 5% overnight.
In Europe, Greece appeared to narrow its differences with European creditors as it offered to cut pensions, hike taxes and reduce state spending, while creditors said they were open to discussing how to ease the country’s debt burden.
In currency markets, the pound lost a little ground against a strengthening euro, edging lower to just under 1.39.
But it gained strongly against the US dollar after official figures showed the UK trade deficit fell to £393m in May, its lowest level since June 2013. Sterling was ahead by a cent against the greenback at 1.55.
Separate data from the construction sector was less welcome, showing a 5.8% decline in new housebuilding – its steepest fall in nearly four years – as the wider sector shrank by 1.3%, its worst fall since February 2014.
The figures highlighted the challenge facing the industry as George Osborne set out plans to shake up house building rules – measures that helped cheer stocks in the sector.
Barratt Developments rose 11p to 631.5p while Charles Church owner Persimmon climbed 34p to 1988p and Taylor Wimpey added 4.3p to 189.2p.
Also among the risers was British Airways owner International Airlines Group after Ryanair cleared the way for its 1.4 billion euro (£1 billion) takeover of Aer Lingus by agreeing to sell its 29.8% stake in the Irish carrier.
IAG shares climbed 3%, or 16.5p to 531p. Ryanair rose nearly 2%, or 27 cents (19p) to 12.38 euros (891p).
The biggest risers on the FTSE 100 Index were Standard Life up 18.3p at 452.3p, St James’s Place up 35p at 952p, TUI up 38p at 1077p and Schroders up 104p at 3104p.
The biggest fallers on the FTSE 100 Index were ARM Holdings down 30p at 1015p, Weir Group down 19p at 1596p, Randgold Resources down 30p at 4152p, Ashtead Group down 3p at 1050p.