Suffering investors were given a boost yesterday after the London market surged more than 100 points - adding £29 billion to the value of blue-chip stocks.

The 3 per cent rise, which saw the FTSE 100 Index close up 122 points at 3689.4, came as investors cheered a move to give space to the insurance sector.

It followed a decision last Friday night by the Financial Services Authority to relax solvency requirements for insurers - taking the pressure off the sector to sell shares.

The sharp falls on the market over the past month have been partly blamed on insurers offloading equities in order to meet regulatory solvency levels and the relaxation of these rules gave a lift to the sector.

Tom Hougaard, trader at City Index, said: "The FSA certainty injected confidence into a turbulent market and the result was instant."

Among the insurers on the rise were Royal & Sun Alliance, Prudential, Norwich Union owner Aviva, Friends Provident and Legal & General.

Shares were also boosted by strong gains on Wall Street, where the Dow Jones Industrial Average was given a push by profits reports.

US investors were also reacting to George Bush's £1.36 trillion spending plan to accelerate tax cuts to bolster the weak economy.