Britain's benchmark share index rebounded on Tuesday from 5-1/2 month lows, with cruise ship group Carnival leading the gainers, after steps by China to reassure markets over its money supply lifted sentiment. The bluechip FTSE 100 index, which had fallen some 12 percent over the last month after racing to a 13-year high of 6,875.62 points in late May, closed up by 1.2 percent, or 72.81 points, at 6,101.91 points.
Traders said the fact that the FTSE managed to close above the 6,100 level - which marked a low point in early January before the index then staged a steady 4 percent rise till early February - could send out a positive signal for the near-term. "We could now see a short-term rebound up to 6,200 or 6,250 but I would expect it to be quickly sold into at 6,250," said JN Financial trader Rick Jones.
Helping the market mood were comments by China's central bank, which said it would not turn the screws too hard on banks in its drive to curb easy credit. Carnival topped the FTSE leaderboard with a 5.3 percent rise. Investors welcomed plans by the company - which has been hit by several accidents - to name a new chief executive and they were also reassured by Carnival's second-quarter profit which beat analyst forecasts. "We welcome both the Q2 results and the management change," Investec analyst James Hollins wrote in a research note, keeping a "buy" rating on the stock.
However, beverage can maker Rexam fell 2.5 percent after issuing a profit warning which underscored the uncertain market outlook. Worries over a Chinese economic slowdown and a likely end to economic stimulus measures from the US Federal Reserve, which had driven an equity rally earlier in 2013, have knocked world stock markets back down over the last month.
Many traders were unconvinced by the FTSE's rebound, opting to take "short" positions to bet on renewed falls in the future rather than "long" positions to bet on a more prolonged rally. "I'm looking to short into strength. I'm not looking to go long here," said Darren Easton, director of trading at Logic Investments.