Top European markets made gains on Tuesday amid speculation that newly-appointed Prime Minister Liz Truss is set to unveil a £90 billion energy bill support package.
This indicated that investors have a more positive outlook on consumer spending power in the coming months should sky-rocketing energy bills be subsidised by the Government.
The FTSE 100 was 13.01 points higher, or 0.18%, at 7,300.44 when markets closed on Tuesday.
Joshua Mahony, senior market analyst at online trading platform IG, said: “For the near-term this [energy package] seems an effective way to bring greater certainty and relieve the pressure on the Bank of England, but the long-term consequence will undoubtedly result in another pile of debt that will ultimately need paying through higher taxes.”
A big sell-off of British government bonds pushed interest rates, known as yields, to its highest levels since 2011 as investors anticipated sweeping energy support measures putting huge pressure on the country’s finances.
But this failed to drastically upset the pound which edged higher against the US dollar after falling to a 37-year low on Monday as overseas traders anxiously awaited the election news. The pound was up 0.15% against the dollar at 1.1546 and down about 0.08% against the euro at 1.165.
Other top indices in Europe managed to recover after losses on Monday. The German Dax was up 0.87% and the French Cac 40 had lifted 0.19% by the end of the day.
In the US, after a delayed start to the week, the S&P 500 was up around 0.35% and Dow Jones 0.2% higher by the time European markets closed.
Meanwhile, the price of Brent crude oil was substantially lower compared to significant increases on Monday. It was down 2.2% to 93.61 dollars per barrel when markets closed.
In company news, shares in Berkeley Group moved higher on Tuesday after the housebuilder said it was on track to meet its profit expectations for the year.
The announcement gave investors some positive news after reports this week that the housebuilding sector is under pressure amid a housing market squeeze.
Shares in the company were 126p higher, at 3,573p when markets closed.
Packaging business DS Smith also reported trading in line with market guidance as the increased cost of packaging prices is set to offset rising energy costs. Shares in DS Smith were 9p higher, at 272p.
Meanwhile, Vertu Motors sounded the alarm over its electricity costs which it said will rise from October after its fixed-price energy deal runs out.
The car dealership group said it had performed strongly in the first half of the year but warned that price inflation and rising energy costs could impact vehicle supply in the future.
Shares in Vertu were down 0.25p to 46.5p at the end of the day.
The biggest risers on the FTSE 100 were Hargreaves Lansdown, up 37p to 835p, Centrica, up 3.28p to 81.94p, Lloyds, up 1.78p to 45.23p, Rightmove, up 23.8p to 616.6p, and Howden Joinery, up 21.4p to 574.6p.
The biggest fallers on the FTSE 100 were Ashtead, down 105p to 4,207p, BP, down 10.65p to 452.7p, BT, down 3p to 142.15p, Shell, down 40p to 2,308.5p, and AstraZeneca, down 134p to 10,514p.