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The FTSE 100 rose 0.5 per cent this morning as Barclays looks set to pass a stress test on its capital position.

At 9:01 GMT the index was up 0.50 per cent to 3,944.97 – a rise of 19.77 points.

Barclays saw the largest gains – up 8.92 per cent to 152.60p – after reports that the Financial Services Authority (FSA) is set to announce the bank does not need to raise further capital to prop up its balance sheet.

The decision would mean Barclays would not have to launch a rights issue to raise extra funds – after already gaining some £7 billion backing from the Middle East investors last year.

The next major hurdle for Barclays next week would be over whether to take part in the Treasury's Asset Protection Scheme and not hand over a stake to the government to cover the cost of the insurance for toxic assets.

The deadline for the Asset Protection Scheme is Tuesday next week and Barclays is already in talks for the £4.5 billion sale of its fund management arm, iShares, which could be used to cover the cost of the insurance.

Elsewhere on the FTSE 100 Lloyds Banking was up 6.38 per cent, while Balfour Beatty gained 4.48 per cent.

Prudential was down 2.31 per cent, Imperial Tobacco fell 2.14 per cent and TUI Travel was down 1.96 per cent.

Last night in New York, the Dow Jones was up 2.25 per cent, while Chicago's S&P 500 rise 2.33 per cent.