Subprime-weary London investors will focus on the Bank of England's final interest rate call before the Christmas and New Year holidays. The FTSE 100 index of leading shares finished on Friday at 6,432.50 points, up 2.72 percent, or 170.4 points, from a week earlier.
Before the Bank of England (BoE) decision on Thursday, investors will absorb a trading update from the Royal Bank of Scotland - which could show how much the British bank has been hit by the slumping US subprime housing sector. Many major global banks have suffered large losses on securities backed by home loans to American homebuyers with patchy credit histories.
The US subprime mortgage crisis has also led to a credit crunch as commercial banks have turned cautious about lending money to each another. "Interest rate decisions are the centre of attention in many places over the course of next week, including the UK, where the MPC makes its announcement on Thursday," said Investec analyst Philip Shaw.
However, most economists expect the Bank of England's Monetary Policy Committee (MPC) will keep borrowing costs at 5.75 percent amid ongoing turmoil on world financial markets.
Interest rate cuts are a boost for companies because they reduce loan repayments and the cost of doing business and they increase the amount of disposable income available to consumers.
Over the course of Friday, the FTSE won 1.31 percent in value after US Federal Reserve chief Ben Bernanke hinted at another US interest rate cut next month.
BoE governor Mervyn King said earlier this week that a period of uncertainty lies ahead for the British economy amid wider global problems stemming from US subprime issues.