The FTSE 100 closed up 79.8 points at 6,212, despite Wall Street opening lower, as energy stocks led the charge.
The index of 100 leading shares opened up strongly after Ben Bernanke, the chairman of the US Federal Reserve, reassured investors when he said the Fed was "monitoring the situation" and was prepared to act if needed to mitigate the effects of the recent credit market turmoil. This raised hopes that the US would go ahead with an interest rate cut.
The banking sector had a rough ride, amid concern about the extent of the exposure of certain banks to the embattled credit market.
Standard Chartered Bank did not seem affected, though, and rose 41p to £15.05. Royal Bank of Scotland, despite the fact that it is trimming down its collateralised debt obligations team, saw its shares rise 5p to 568p, and Northern Rock increased 5.5p to 726p. Barclays, though, was one of the only fallers, down 2.5p to 597.5p amid worries about its exposure to the credit market.
But the FTSE 100 saw all the miners rise. Anglo American rose 59p to £27.71, and Xstrata increased 68p to £28.80. Rio Tinto, meanwhile, was up 52p at £33.07 as it announced it had completed the syndication of its $40bn loan for its takeover of Canadian aluminium producer Alcan.
Oil and gas stocks were also up. BG Group, the natural gas company, rose 32p to 782p, and BP was up 8.5p at 551p, despite oil prices dipping slightly.
Diageo, the world's largest alcoholic drinks company, increased 24p to £10.42 as it posted a 6% rise in its full year reported operating profit to £2.2bn. The group, which makes Smirnoff vodka and Johnnie Walker whiskey, raised its profit target for 2008.
But DSG International, the electrical goods retailer, topped the list of losers and saw its shares drop 2.5p to 154.8p despite saying its like-for-like sales rose 6% in the 16 weeks to August 18. The group issued a note of caution for future trading. John Clare, chief executive of DSG International, said: "Whilst the year has started well we remain cautious about the outlook for the consumer in the UK and across much the rest of Europe in a higher interest rate environment."
On the FTSE 250, Rank was one of the top risers, up 13.5p to 167.75p. The casino operator was one of the only companies to welcome the wet summer. The group said like-for-like sales from its bingo clubs in England fell 4.4% since the introduction of the smoking ban on July 1, adding this performance had benefited from more favourable weather as the rain brought in more people than anticipated.
Emap, meanwhile, rose 48.5p to 885p as it said it had received "further interest" for all parts of the company, after announcing the review of its group structure and portfolio of assets at the end of July.
Amlin, the insurer, was up 18.7p at 305.75p as it posted good first-half results. Pre-tax profit for the first six months of the year rose 54% to £185m, The group said its outlook for the rest of 2007 and for 2008 was positive, and it added it intended to return capital once the outcome of the hurricane season was known.
Informa was another good performer, with shares up 15p to 556p. The publisher saw almost flat first-half revenue, but saw a 125% increase in pre-tax profit to £87.8m. The group said it was confident for 2007.
Analysts at Numis Securities said: "We continue to be impressed by Informa's strong organic growth, prodigious cash generation and position within a consolidating industry combined with a highly capable management team." They raised their price target to 700p from 683p, and kept their buy recommendation.
Hunting, however, did not have such luck, as its shares fell 55p to 700p. The group, which provides services to the oil industry, posted a 10% rise in first-half pre-tax profit before exceptional items to £38.9m, but sales fell 1% to £877.2m. Dennis Proctor, chief executive of the company, said the weather, currency fluctuations, gas prices, light and heavy crude price differentials, and geopolitical issues would influence future performance. But he added the fundamentals of diminishing reserves and growing demand were still positive for the group.
Still in the results arena, Filtrona, the supplier of plastic and fibre products, posted a 5.3% drop in first-half pre-tax profit to £26.7m due to adverse currency impacts and restructuring costs. Reported revenue was down 4.5% to £257.2m, also due to the currency effects. Shares in the company, as a result, fell 3.75p to 226p.
Further down, MDY Healthcare and William Ransom & Son both saw their shares go up on the back of a retail joint venture selling natural healthcare products direct to consumers through the internet, mail order and telesales. As part of the deal, Ransom will source and/or manufacture products, and MDY will provide up to £3m in loan capital to finance it. The joint venture is expected to launch commercial activities next year.
Brett Pollard, an analyst at Numis Securities, Ransom's house broker, said: "The market potential is attractive as a result of the continuing growth in e-commerce and the potential for DTC [direct-to-consumer] growth. DTC is currently only 5% of the OTC [over-the-counter] market, estimated at £2.6bn according to the company." Shares in MDY healthcare were up 7.5p at 72p, and Ransom rose 1.5p to 41p.