The FTSE 100 index closed up 49.24 points, or 0.9 per cent, at 5,383.45, having fallen one per cent on Tuesday.
Rolls Royce, Cobham and BAE Systems helped boost the blue chips, up 1.7-5.4 per cent, as investors reacted positively to the composition of a coalition government and appointment of Liam Fox as the new defence minister. “Liam Fox is hard line on defence and he will fight hard for his corner,” said independent defence analyst Paul Beaver.
Outsourcing firm Capita and peer Serco, up 4.8 and 3.7 per cent, also benefited from the greater perceived stability provided by the coalition government.
Compass, the world’s biggest caterer, gained 5.3 per cent after the firm posted solid first-half results.
“One of the themes that’s been left behind over the last week or so is the ongoing strength of quarterly earnings,” said Richard Hunter, head of UK equities at Hargreaves Lansdown, particularly in the United States, but also in the UK.
“There may well be an element of realignment there now that another uncertainty has been removed with the coalition government being formed.”
Travel firm TUI Travel was the top blue chip riser, up 6.5 per cent, while peer Thomas Cook, which reports first-half results tomorrow, rose 6 per cent as European flights got back to normal after the ash cloud which caused difficulties over the Atlantic and the Iberian Peninsula dispersed.