The FTSE 100 rose around 0.42% to 10541.69 on Tuesday, with softer oil prices and lower government bond yields improving sentiment after last week’s sharp bond-market volatility.
The FTSE 250 also gained around 0.38% to 24,215.33 as lower borrowing costs supported more domestically exposed companies.
Brent crude fell by around 2% and moved back below $100 a barrel, helped by resilient Middle Eastern crude exports and the release of emergency oil stocks by G7 countries.
Lower energy prices potentially ease pressure on inflation, household finances and corporate transport costs, although continued security risks in the Middle East mean the supply outlook remains volatile.
UK government bond yields also retreated after the 10-year and 30-year gilt yields reached multi-decade highs last week.
The easing in yields provided some relief to rate-sensitive sectors, although expectations for tighter monetary policy remain elevated.
Bank of England policymaker Catherine Mann said inflation had become embedded in the UK economy and warned that it could become further entrenched when wage negotiations intensify early next year.
Markets are pricing a high probability of a Bank of England rate increase in November, although Reuters separately reported pricing closer to 80% during Tuesday trading rather than the 90% figure cited earlier in the session.
Defence stocks were among the weakest areas of the London market.
BAE Systems, Babcock International and Rolls-Royce fell, with some defence-sector shares down between approximately 2% and 4%.
The weakness followed a Times report that Prime Minister Andy Burnham’s government could delay setting out its roadmap for increasing UK defence spending to 3% of GDP.
The Treasury pushed back against that interpretation, saying no date had been set for the next Spending Review and describing reports of a delay as speculation.
Among individual stocks, Informa rose around 3% after announcing the acquisition of events organiser Clarion for £2.24 billion and plans to separate its Taylor & Francis academic publishing division.
The transaction further concentrates Informa on its faster-growing international events operations, although it also reduces diversification by separating the academic publishing business.
On the FTSE 250, Clarkson advanced after forecasting annual underlying pretax profit above market expectations, supported by strong conditions in shipping markets.
ASOS fell almost 10% after customers received push notifications claiming the retailer had been hacked.
The company said some basic personal information may have been accessed but that it did not believe payment-card details or customer passwords had been compromised. The UK National Cyber Security Centre is assisting with the investigation.
For investors, Tuesday’s market move reflects a partial reversal of two of the biggest pressures on UK equities over recent weeks: rising energy prices and surging bond yields.
However, the relief remains fragile.
Persistent UK inflation, expectations of another Bank of England rate increase and uncertainty around government spending mean the market remains highly sensitive to further moves in oil, gilts and interest-rate expectations.
