Britain's leading shares broke a five-day losing streak on Wednesday after upbeat corporate earnings from the US and positive mergers and acquisitions sentiment spurred a rebound, led by banks and commodities. The FTSE 100 closed up 75.18 points, or 1.5 percent, at 5,214.64, having shed 2.5 percent over the previous five sessions. UK Banks were given a lift as US peer Morgan Stanley reported higher than expected second-quarter profit.
Barclays was a top performer in the sector, up 1.9 percent, with investors also awaiting the results of European bank stress tests, due out on Friday. Soft drinks maker Coca-Cola Co also beat the Street expectations, with Google earnings due after the close. "We expect the markets to bounce around like a cork in the bath for the next three months responding to good and bad news accordingly," said David Buik, senior partner at BGC partners,
Buik expects the FTSE 100 to be range bound between 5,000 and 5,300 until the year-end but in the short term sees no reason to desert equities when the signals out of certain companies are encouraging. Integrated oils were led higher by BP, up 3.2 percent after the company announced the first asset sales to help pay for the worst oil spill in US history.
Reflecting the market's appetite for risk, miners were on the front foot along with firmer metal prices. BHP Billiton gained 2.5 percent after reporting a 16 percent jump in quarterly iron ore output, although it voiced caution on the short-term outlook for commodity markets. Peer Kazakhmys was the top FTSE gainer, up 7.0 percent, while Antofagasta added 4.8 percent.
Household and personal-care products firm Reckitt Benckiser gained 3.5 percent after agreeing a 2.5 billion pounds take-over of mid-cap condom maker SSL International, which leapt over 33 percent higher. M&A possibilities were a spur to gains by tour operator TUI Travel, up 3.2 percent after the Daily Telegraph's market report suggested a possible mop-up bid by 54 percent shareholder TUI AG of Germany, citing a recent Morgan Stanley note.
Revived talk of a possible takeover move also resulted in hedge fund manager Man Group adding 3.1 percent. Other big gainers included British Airways, up 5.4 percent after the US approved a bid by the Oneworld alliance to broaden a transatlantic tie-up and cooperate over scheduling, pricing and other services. On the downside, Smith & Nephew fell 4.5 percent after investors weighed up disappointing results from US orthopaedics peer Stryker. Talk Citigroup had placed 8 million shares in Smith & Nephew at 559 pence each was also a drag on the stocks.
Cable & Wireless World-wide dropped 4.8 percent as brokers continued to cut their ratings and estimates on the firm, following Tuesday's downbeat trading update. On the macro economic front the Bank of England's Monetary Policy Committee voted 7-1 to keep interest rates at 0.5 percent this month.
Stateside, US Federal Reserve Chairman Ben Bernanke will deliver his semi-annual testimony before Congress on Wednesday and Thursday. "Investors will be keen to listen to what he has to say after a weak recent bout of economic data could potentially open the door for a more accommodative stance from the Fed," said Nick Serff, market analyst at City Index.