FINANCIAL markets staged a fightback while the pound steadied after two days of punishing falls in the wake of the Brexit vote.
The FTSE 100 Index rebounded by 2.64% or 158.19 points to 6170.26 after seeing nearly £100 billion wiped off the value of Britain's blue chips in the previous two sessions.
Sterling also rose more than 0.9% to just over 1.33 US dollars after dropping to a 31-year low against the greenback and was 0.4% higher at 1.20 euro.
Equities across Europe were also rallying strongly, with the Cac 40 in France up 2.5% and Germany's Dax 2% higher.
Oil prices joined in the bounce back, with Brent crude 1.7% higher at 48.30 US dollars a barrel.
But Connor Campbell at Spreadex warned the rally could be a "dead cat bounce".
He said: "This may well be a dead cat bounce, but one imagines given the state they are in the global markets will welcome any respite they can.
"With little data on the cards this morning - not that investors would be paying much attention if there were - the post-Brexit fallout will continue to define the day's trading."
The pound and the FTSE have taken a pounding since the shock referendum result, which has led to volatility across global stock markets.
On Monday, Standard & Poor's stripped the UK of its tripe-A credit rating following the vote.
Tony Cross, market analyst at Trustnet Direct, said while the UK's credit downgrade was a blow, it meant "just a little of the uncertainty is starting to ebb away".
"We may not be out of the storm, but hopefully the worst is behind us," he added.
Banks, housebuilders and retailers led the fightback in London, with stocks that have been punished in recent days clawing back some of their heavy losses.
Lending giants Lloyds Banking Group and Barclays, which have seen their shares decimated since the Brexit vote, were up 6% and 3% respectively.
Royal Bank of Scotland was also up 3%, having seen its shares plunge to its lowest since January 2009, when the bank was rescued in a taxpayer bail out at the height of the financial crisis.
Barratt Developments and Taylor Wimpey led housebuilders higher in the FTSE 100, up 5% each.
Bovis Homes and Redrow were 5% and 2% higher in the FTSE 250 Index respectively.
Builders have been hit hard amid fears over the impact of the vote on property prices and the housing market.
Retailers were also seeing strong gains in the rally, with Next the biggest blue chip riser in the sector, up 10%, followed by Marks & Spencer with a 6% rise.
Rolls-Royce was another enjoying gains - up 3% - as it reaffirmed its commitment to the UK despite Brexit and said currency movements would boost underlying revenues by around £400 million and improve underlying profit before tax by around £40 million.
Online grocer Ocado was 9% higher in the FTSE 250 as its chief executive Tim Steiner assured over the impact of Brexit on the retail sector and posted a 5.7% rise in half-year earnings.
But he warned the weaker pound could lead to higher prices for shoppers as supermarkets face higher costs to import food and goods.
ends
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