By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- U.K. stocks registered broad-based gains Monday, as banking shares rallied in step with the broader European equity markets and as BP PLC advanced on reports that the oil major plans what would be a multibillion-pound share buyback.

The FTSE 100 index marked its best daily performance in almost a year, jumping 2.4% to close at 5,737.66 and climbing back from its lowest level since late July reached on Friday.

BP's shares gained 3.6%, as the Sunday Times reported that the company (BP) is planning to spend as much as 3.7 billion pounds ($5.9 billion) to repurchase stock in order to revive its share price.

A buyback could come as early as next year, the Times report said. A representative from BP declined to comment.

Shares of other energy companies also rose, as crude-oil futures jumped clear of $89 a barrel in New York. Royal Dutch Shell PLC (RDSB) moved 1.8% higher.

Shares of London-listed mining companies also were on the rise to begin the week, tracking rising metals prices across the board.

BHP Billiton PLC (BHP) rose 3.7%, while shares of Rio Tinto PLC (RIO) added 3.1%.

Eurasian Natural Resources Corp. shares climbed 4.8%, after RBC Capital Markets upgraded its rating to outperform from underperform.

Among notable banking shares, HSBC Holdings PLC (HBC)(HBC) gained 3.8%, as the bank said it's in talks to sell its stake in China's second-largest insurance firm. A deal for the interest in Ping An Insurance (Group) Co. of China Ltd. could net HSBC a $7.5 billion profit.

Shares of Lloyds Banking Group PLC (LYG) also rose, up 2.7%, as the bank said it has agreed to sell a portfolio of Irish real-estate loans to Risali Ltd. for  £149 million in cash.

And Barclays PLC shares (BCS) gained 6.6%, moving higher after Goldman Sachs raised its rating on the bank to buy from neutral.

"If Barclays delivers on a business plan to generate returns that match the group's cost of capital, the stock could offer sector-leading upside, on our analysis. Meanwhile, in the absence of such a plan, the stock should have some downside support," Goldman analysts said.

"In our view, this creates a compelling risk/reward ... and we add the stock to the buy list," they said.

Other banks also posted gains, reflecting a risk-on trend seen across global financial markets on hopes for U.S. policy makers in negotiations to avert the so-called fiscal cliff.

Shares of Royal Bank of Scotland Group PLC (RBS) gained 3.6% as Standard Chartered PLC rose 2.9%.

In technology, shares of ARM Holdings PLC (ARMHY) added 5.1%. Morgan Stanley analysts said they remain buyers of ARM after the chip maker gave a "very bullish presentation" at a conference in Barcelona.

Outside the major index in London, shares of Lonmin PLC rallied 9.3%, after the platinum miner, the subject of a reverse takeover offer lodged by Xstrata PLC , said a proposed rights issue valued at $817 million on a gross basis passed with 91.1% of the votes cast in favor.

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