Optimism that a settlement will be reached on the Greek financial crisis saw the Athex Composite Index in Athens soar by 9%, while other markets were given a lift by the news.

Negotiators insisted there was no deal yet, and the situation in Athens remained tense as protestors once again gathered amid talk of a sell-out by the left wing government.

The sticking points have been pensions and VAT and to what extent the Greek Prime Minister is able to stick to the promises on curbing the austerity measures made to the electorate in the General Election.

But the mood music on markets indicated that a deal will be thrashed out to bail out the country in the form of an injection of funds from the European Central Bank.

The news helped boost the FTSE100 by 1.72% to close up 112.71 at 6,825.67. It was also lifted by bid speculation concerning media group Sky and utility Severn Trent.

Sky rose 3% on speculation that the Murdoch family may resurrect their bid for the company. Severn Trent advanced 4.3%, making it the top FTSE riser, after a report that Canadian investment company Borealis Infrastructure was considering a bid.

Small-cap chocolate firm Thorntons surged more than 40% following an offer from after Ferrero International, maker of Ferrero Rocher made a bid at 145p a share which represented a 43% premium to Friday’s close.

Scottish power generator hire firm Aggreko gained 22p or 1.5% at 1,488p after revealing plans to restructure into two units and a raft of management changes.