The FTSE 100 ended up 33.15 points, or 0.6 per cent, at 5,857.52, having shed 0.5 per cent on Monday, in volume at around 60 per cent of the 90-day daily average.
Cyclical mining stocks and banks, big fallers in the previous session, were the standout gainers, up 2.3 per cent and 1.5 per cent respectively.
“I think the appetite for risk is still out there, even though volumes are fairly thin. Every dip seems to be seen as a buying opportunity – that’s why the indices are near multi-year highs,” said Manoj Ladwa, head of trading at TJ Markets.
Conjecture continued as to whether the European Central Bank was preparing to cap the borrowing costs of troubled sovereign borrowers.
The FTSE 100 has jumped around six per cent since late July when ECB President Mario Draghi said the bank was prepared to do “whatever it takes” to save the euro, sparking expectations of bold measures to help lower the borrowing costs of debt-stricken Spain and Italy.
Commodities trader Glencore reversed early losses, ending the session up 1.8 per cent, after posting a smaller than expected drop in first-half earnings, while sticking to its guns on a $30bn bid for miner Xstrata.
Insurers also saw good demand, helped by bullish comment on the European sector from JP Morgan Cazenove, which said that some of the industry's major stocks are looking oversold and the sector offered an attractive dividend yield.