A rally in financial stocks, including Legal & General, lifted Britain's leading share index on Tuesday after insurer Prudential beat earnings forecasts and sounded a upbeat note on trading. A rise in US consumer confidence injected support while a 2.4 percent gain in mobile phone giant Vodafone also lent backbone in the wake of higher-than-expected earnings from its US joint venture Verizon Wireless.
Resurgent insurers and a recovery in banking shares such as Barclays and Lloyds TSB helped Britain's FTSE-100 index rise 37.9 points, or 0.9 percent, to 4,324.9.
On Monday the index closed at its lowest point since October.
The index accelerated its advance after data showed that US consumer confidence rose, assuaging some concern that the economic revival was petering out.
But Darren Winder, equity strategist at investment bank UBS said nagging concerns that the corporate earnings recovery will soon peak may continue to hamper the broader market's progress.
"Earnings estimates are probably too high and will get revised down over the course of the next year," he said.
"There are going to be more cost pressures coming through from the labour market and raw materials. But even allowing for that, the degree of pessimism built into valuations at the moment is excessive."
Shares in insurer Prudential rose 1.4 percent, while its strong sales growth in Britain gave a boost to rivals after a prolonged period of weakness. Legal & General gained 2.2 percent, Royal & Sun Alliance added 1.7 percent, and Aviva climbed 2.1 percent. But news and information company Reuters fell 5 percent to 307 pence after it gave no clear view of when core revenue growth would return, even as it reported a better-than-expected gain in first-half underlying profit.
Reuters' joint house broker Smith Barney cut its share price target to 360 pence a share from 380p.
"The main reason for cheer seems to be cost-related, which, while a good thing, has natural limitations. With financial markets in the doldrums, there is little reason to chase the shares," said Paul Bates, analyst at stockbrokers Charles Stanley.
British American Tobacco was another failure following results. Its shares fell 1.6 percent after it reported a rise in first half pre-tax profit but said the strength of sterling would continue to be felt in the second half.
Shares in Amvescap slid 2.3 percent after the Securities and Exchange Commission asked a judge for another month to file more charges against its money management unit Invesco.
Among mid-caps, shares in healthcare software firm iSoft recovered some of Monday's fall that was triggered by a media report that it faces parliamentary questions over its accounting policy.
Dealers said the 10 percent drop was overdone.
But shares in British fashion retailer French Connection fell more than 8 percent, knocked by comments in a leading trade magazine which were critical of its irreverent "FCUK" branding, traders said.