Global stock markets roared to their highest levels of the year yesterday, buoyed by better-than-expected profits at some of Europe's biggest banks and growing confidence that the worst recession in decades may 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, propelled Europe's leading share index to a fresh 2009 record and sent London's FTSE 100 to its highest since October. 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 in the first six months of the year and UK-based Barclays, which acquired the US operations of Lehman Brothers last autumn, unveiled an 8 per cent jump in its interim profits. Stephen Green, HSBC chairman, said: “We have passed or are about to pass the bottom of the cycle in the financial markets.”