Another £33 billion was added to the value of UK blue chips on Tuesday as London’s leading share index extended its relief rally.
But investor profit-taking saw early session gains pared back, to leave the FTSE 100 Index up 3.2 per cent, to close 137.3 points higher at 4394.2.
The Footsie had soared by as much as 6.5 per cent at one stage, coming after a surge of more than eight per cent on Monday following the UK’s £37 billion banking bail-out and similar global action to end the stock market turmoil.
The Dow Jones Industrial Average also gave back some of its 400-point opening surge as investors looked to take profits after the record-breaking rise.
The US index later stood a more muted one per cent higher, although investor spirits remained upbeat after President George Bush unveiled plans to follow the UK’s lead and buy shares in the nation’s leading banks, at a cost of 250 billion US dollars.
Mr Bush said it was “an essential short-term measure” to get loans moving again.
Other markets across Europe posted further gains, including Germany’s Dax and the CAC 40 in France, both of which rose by 2.7 per cent.
In London, high street bank Barclays was the top-performing blue chip company, with a rise of 14 per cent.
Anthony Grech, market strategist at IG Index, said while the market had enjoyed another positive day’s trading, the high volatility suggested further falls could be on the horizon.
“Traders were always a bit twitchy that the strength seen so far could be just a flash in the pan and at the moment they still seem as willing as ever to head for the exits on the first sign of weakness,” he said.
Banks again saw a mixed session, with Royal Bank of Scotland, whose shares have been the biggest casualty of the recent turmoil, down one1 per cent after an earlier rise of seven per cent. This is below the 65.5p price of the £15 billion in new shares it will offer existing shareholders under its capital-raising plans.
Merger partners HBOS and Lloyds TSB also remained on the back foot, down seven per cent and five per cent respectively.
Justin Urquhart Stewart, a director of Seven Investment Management, warned amateur investors to expect further volatility.