Global stock markets soared to their highest levels of the year yesterday, buoyed by better than-expected profits at Europe’s biggest bank and growing confidence that the worst recession in decades could soon be over.

The powerful rally in equities took New York’s benchmark S&P 500 index above 1,000 for the first time since early November and propelled Europe’s leading share index to a fresh 2009 record. Asian stocks surged to 11-month highs.

Shares in some of the world’s largest banks enjoyed the most impressive gains after HSBC reported pre-tax profits of $5bn (£2.9bn) in the first six months of the year and Barclays announced an 8 per cent jump in its interim profits.

Stephen Green, HSBC chairman, said: 'It may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets.'

Barclays reported record firsthalf income of £16.2bn and firsthalf profits of £2.9bn, helped by a strong performance from Barclays Capital, its investment bank.

Financial Times