Better-than-expected figures from Vodafone, the UK market's biggest stock, and a rally in US technology stocks helped the London market wipe out Monday's losses yesterday.
Investors brushed aside the mobile telephone operator's 4.6 billion first half loss (after exceptionals and goodwill) and the 24.5 per cent (pre-exceptional and goodwill) decline in earnings per share. Instead they focused on the company's top-of-the-range numbers for EBITDA (earnings before tax, interest, depreciation and amortisation) and upbeat statement about the second half.
Vodafone shares jumped 10.2 per cent, adding around 65 points to the FTSE 100 index.
Technology stocks also surged as US investors followed their usual approach of "buying on the dips" and moved into the Nasdaq Composite after it closed below 3,000 on Monday.
Both the Dow Jones Industrial Average and the Nasdaq chalked up triple digit gains in early trading, aided by hopes that the US presidential election dispute might finally be coming to a close. An end to the uncertainty is expected to spark a rally in equities.
Some recently-battered technology stocks led the UK rebound with Bookham Technology the best performer in the FTSE 100 index after being the worst performer on Monday. The top 10 Footsie stocks were all from the technology or telecom sectors.
The Techmark 100 index of leading technology stocks, which fell 4.5 per cent on Monday, gained 99.97 or 3.2 per cent to 3,177.21.
The FTSE 100 jumped 138.1 points to 6,412.9, more than regaining the ground lost on Monday. The index needs to gain more than 500 points in the next seven weeks if it is to avoid its first losing year since 1994.
Medium and small-sized stocks were also stronger. The FTSE 250 rose 69.1 to 6,698.2 and the SmallCap moved up 12.7 to 3,316.3. There was, however, another UK profits warning yesterday; the culprit was Scottish paper company Inveresk.
UK inflation numbers for October turned out better than expected with the underlying annual rate dropping from 2.2 to 2 per cent (the target is 2.5 per cent). That increased interest rate optimism ahead of the Bank of England's quarterly inflation report, which will be released on Thursday.
"On balance, we still subscribe to the view that rates have a little further to rise, possibly in the second half of next year in response to a generous Budget in March," said Philip Shaw, UK economist at Investec. "Interest rate markets, however, disagree. In fact, since Monday short sterling has begun to price in sub-6 per cent LIBOR next year for the first time in almost 18 months."
Turnover picked up substantially, with 2.04 billion shares by the 6 p.m. count. Vodafone was responsible for more than 450 million shares. ITG Europe said its Posit matching system had its most active day yet, executing 100 million of share trades worth around 400 million.
