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Shares on London's FTSE 100 index climbed in early trading today, continuing a world rally prompted by a record close on Wall Street.

In early trading the benchmark index was up 55.9 points, or 0.9 per cent, rising to 6,562.1 - its highest level since the end of July.

The rise comes after US stocks surged yesterday, leading some analysts to speculate that the markets may have seen the worst of the global credit crunch.

Traders on Wall Street saw the Dow Jones industrial average close up 1.38 per cent, or 191.92 points, at 14,087.55 - the first climb above 14,000 seen since mid-July.

Meanwhile the technology-based Nasdaq jumped to its highest level in more than six-and-a-half years, closing up 1.46 per cent higher at 2,740.99.

Asian stocks subsequently rallied, with bourses in Australia, Singapore and Hong Kong climbing to record levels. Japan's Nikkei average also closed up 1.2 per cent to finish above 17,000 points for the first time in eight weeks.

The global rally comes despite investment banks Citigroup and UBS warning yesterday that their profits had fallen due to their exposure to bad debts in the US sub-prime mortgage market. Investors appear to have been cheered by the bank's claims that their businesses are now returning to normal after disappointing performances during the third quarter.

In recent months share prices across the globe have been fluctuating amid concerns that the problems in the sub-prime market, which provides home-loans to those on low incomes or with poor credit ratings, could spread to the wider economy.

Speculation that the world's markets may now have experienced the worst of the fallout from the difficulties in the US housing market has been accompanied by expectations that America's central bank may cut interest rates again.

The anticipation follows a report showing that US manufacturing grew at its slowest pace for six months in September, with some analysts predicting that the Federal Reserve will slash interest rates further in a bid to boost the world's leading economy.

"Sentiment has swung 180 degrees in the course of the last week or so," Jim Wood-Smith, head of research at Williams de Broe, was quoted as saying by the Reuters news agency.

"Markets are beginning to take a bet that we can't lose," he added.