London close: Footsie up 0.7% as banks and IAG surge

-Euro optimism drives gains.-Barclays, Lloyds, RBS leads the risers.-Essar falls 11.9%, still volatile after Indian tax ruling.A combination of better-than-expected earnings figures and economic data from the US, talks of progress between the Greek government and private creditors, and strong demand in Spanish and French auctions helped to boost market sentiment on Thursday, pushing the FTSE 100 to its highest levels of the day by the close.In the US, initial jobless claims fell to a four-year low, sinking by 50,000 to 352,000 last week, according to the latest data from the US Labour Department, well below market consensus forecasts of 392,000. Bank of America and Morgan Stanley added to positive sentiment, lifting the financial sector higher after fourth quarter results from both banks beat forecasts.Earlier in the day, a source from the Greek finance ministry told French news agency Agence France-Presse that a positive result from discussions between the government and private creditors is expected by this weekend.Of possible interest in that regard, the Institute for International Finance (IIF), which is representing private creditors, has called for an increase on the interest rate on new Greek bonds, currently the main bone of contention. "We are discussing a proposal for a coupon starting at around 3.6%-3.7% which will progressively increase over time," one EU official told Dow Jones Newswires.On the negative side of things, Goldman Sachs downgraded several major food retailers today, including Tesco and Sainsbury's. On the other hand, International Airlines Group also rose sharply higher, on the back of reports that Qatar Airways' chief executive said the company is examining a potential acquisition in Europe. Middle East carrier Qatar Airways is examining a potential acquisition in Europe, where it last year purchased a stake in freight operator Cargolux International, chief executive officer Akbar Al Baker said today in a briefing at the Bahrain Air Show, Bloomberg News is reporting.BANKING SURGE LIFTS THE FOOTSIEBanks led the risers today with Barclays topping the chart jumping 10%. Sector peers Lloyds, Royal Bank of Scotland, Standard Chartered and HSBC also finished the day with impressive gains.Essar Energy was the heaviest faller though, tumbling 11.9% as it continues to be hampered by problems in India, with its oil division being told on Tuesday that it's no longer eligible to benefit from a deferred tax payment scheme. Nomura downgraded its view on the tobacco sector from bullish to neutral. The broker has reduced its 2012 earnings estimates for Imperial Tobacco and British American Tobacco, causing both stocks to fall. Drugs giant AstraZeneca fell 1.3% after the US Food and Drug Administration (FDA) announced that it wants more clinical data on its dapagliflozin treatment for type 2 diabetes in adults to assess the "benefit-risk" profile of the drug. Sector peer GlaxoSmithKline fell by 2.2%.Drinks firm SABMiller was flat after saying that it continues to struggle in Europe and North America, which held back lager volume growth to 3% in the third quarter.Publishing group Pearson was lower despite upping its earnings guidance for 2011. Nomura said this morning that it expects organic growth rates to be less than 1% and flat in 2011 and 2012, respectively. The broker maintained its negative view on the stock, noting that the valuation is high at a price-to-earnings (FY12E) multiple of 14.6. ON THE FTSE 250...As Comet-owner Kesa plummeted into the bottom spot on further news of on-going struggles, shares in rival company Dixons soared into pole position. Soon-to-be disposed Comet, which is no longer classed as a continuing group operation for Kesa, saw third quarter sales drop by 15% and by 14.5% on a like-for-like (LFL) basis, as poor trading in the peak period between Boxing Day and the New Year offset an improving trend pre-Christmas. While the disposal is expected to complete in two weeks' time, Kesa has revealed that given the division's performance, net debt will exceed the agreed net debt threshold by up to £10-15m. Talvivaara, the Finland focused nickel and zinc miner, was on the rise after being notified this morning of a 'positive opinion' by the European Commission on its uranium recovery processes, which in effect certifies that the company meets the mandated safeguards for supply security of nuclearfuel. FTSE 100 - RisersBarclays (BARC) 221.35p +10.07%Lloyds Banking Group (LLOY) 32.27p +9.06%Royal Bank of Scotland Group (RBS) 27.06p +8.94%International Consolidated Airlines Group SA (IAG) 165.50p +6.50%Land Securities Group (LAND) 679.50p +5.68%Schroders (SDR) 1,437.00p +5.27%Aviva (AV.) 342.00p +5.23%Standard Chartered (STAN) 1,559.00p +4.70%CRH (CRH) 1,340.00p +4.69%Evraz (EVR) 435.50p +4.66%FTSE 100 - FallersEssar Energy (ESSR) 120.00p -11.89%British Sky Broadcasting Group (BSY) 666.50p -3.34%Polymetal International (POLY) 1,102.00p -3.33%British American Tobacco (BATS) 2,897.50p -2.19%GlaxoSmithKline (GSK) 1,437.50p -2.01%Rolls-Royce Group (RR.) 735.00p -1.93%Diageo (DGE) 1,381.00p -1.46%AstraZeneca (AZN) 3,070.00p -1.33%Shire Plc (SHP) 2,165.00p -1.32%Pearson (PSON) 1,230.00p -1.28%FTSE 250 - RisersDixons Retail (DXNS) 13.58p +14.50%Yule Catto & Co (YULC) 200.00p +12.17%International Personal Finance (IPF) 187.00p +12.11%Home Retail Group (HOME) 102.00p +9.32%Invensys (ISYS) 200.00p +8.64%Kenmare Resources (KMR) 49.56p +7.48%Ocado Group (OCDO) 80.10p +6.94%DS Smith (SMDS) 230.00p +6.78%Great Portland Estates (GPOR) 372.90p +6.70%William Hill (WMH) 223.00p +6.34%FTSE 250 - FallersKesa Electricals (KESA) 73.00p -6.29%Fenner (FENR) 449.70p -2.66%Booker Group (BOK) 72.30p -2.63%Cranswick (CWK) 730.50p -2.60%Interserve (IRV) 311.80p -2.53%Telecom Plus (TEP) 695.00p -2.52%JD Wetherspoon (JDW) 407.90p -2.18%BTG (BGC) 315.60p -2.17%TalkTalk Telecom Group (TALK) 123.40p -1.91%Stobart Group Ltd. (STOB) 120.00p -1.88%