INVESTORS shrugged off gloomy US output figures yesterday as banking shares led a gain of more than two per cent for the London market and swine flu fears took a back seat.

Although the first-quarter figures showed the world’s largest economy is still deep in recession, markets took cheer from signs of recovering consumer spending, as well as a sharp fall in industry stockpiles, suggesting recent falls in production could soon come to an end.

The FTSE 100 Index closed 93.2 points higher at 4189.6.

Major banks led the way after part-nationalised Royal Bank of Scotland and Lloyds Banking Group drew positive comments from HSBC brokers.

RBS nd Lloyds found favour after analysts said that their participation in a taxpayer-backed insurance scheme for toxic debts had increased certainty over their balance sheets. RBS was the leading blue-chip stock, up more than 12 per cent or 4.1p to 36.8p, which was closely followed by Lloyds, up 7.9p to 103.5p, after HSBC lifted its target price on the pair.

Barclays, also marked up by HSBC, gained 24.25p to 256.5p, or more than ten per cent. Asian-facing Standard Chartered cheered 69.5p to 999p.

Investors returned to some stocks set back by swine flu concerns in recent sessions. British Airways added 5.5p to 148.6p and easyJet gained 17p to 319.25p in the FTSE 250, almost six per cent.

Back in the top flight, holiday firm TUI Travel also saw a rise, with stocks up 3.5p at 256.75p, after suffering falls in the wake of the outbreak and its moves to cancel trips to Mexico.

But Thomas Cook, which has also suspended travel to the country, saw its shares fall 2.75p to 263p, despite brokers saying the recent weakness was a buying opportunity.