FTSE 100 index rose two per cent yesterday as traders said dividend hunters tapped into beaten-down defensives and there was some short-covering ahead of a Federal Reserve meeting on US monetary policy options.
Oil stocks including BP, pharmaceuticals including GlaxoSmithKline and telecoms including Vodafone were among those adding most points to the index.
But the total traded volume for all FTSE 100 shares was just 72 per cent of the 90-day daily average.
“Most of the buying was selective and driven by the momentum boys, who see a move and pile in behind it,” a head of institutional trading at a UK-based brokerage said, adding conviction was low in the light of the broader issues of weakening global growth and the regional debt crisis.
Among the top individual movers was cruise firm Carnival, which ended up 6.6 per cent after quarterly profits got a boost.
The FTSE 100’s two per cent gain put it up 104.15 points at 5,363.71. But it remains down 0.5 per cent in September and nine per cent so far this year, however.
While the blue-chip index recovered all of Monday’s fall, the volatility index was less bullish. It ended down 8.2 per cent after a climb of 10.3 per cent on Monday.
Analysts said investors were wary of going short into the Federal Reserve meeting due to a belief that further monetary stimulus measures could be announced.
Outside of the top index, property firm DTZ fell 4.8 per cent. The firm later released a statement saying it was not aware of the reason for the fall, and repeated that it is still evaluating takeover and other options.