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After briefly looking like it might recover a large part of the ground lost on a tough Monday, the FTSE 100 closed up modestly on Tuesday.
The City’s top index gained 26.64 points, or 0.4%, by the end of the day, ending at 7,243.22.
It had traded as high as 7,311.65 earlier in the day.
The index made up some lost ground, but it is still around 150 points off where it started the week after dropping 2.3% on Monday.
“European markets have seen a modest rebound from yesterday’s two-month lows, after the carnage of the last three days, as investors look for signs of a possible base,” said CMC Markets analyst Michael Hewson.
“The FTSE 100 is also seeing a decent session, however it is still some way short of reversing the losses we saw yesterday.
“Today’s rebound has been led by some of the more beaten down areas of the market, with Melrose Industries doing well after hitting one-year lows yesterday.
“It is also notable that while we are seeing some decent gains today, consumer staples are still lagging the wider market, showing that investors remain concerned about consumption trends, and the effect higher inflation will have on consumer spending patterns.”
The stragglers included British Airways owner IAG, which is reportedly going to overhaul its management after facing staffing issues.
Its shares shot to the bottom of the index after dropping 3.5%.
US markets lost further ground from Monday as the S&P 500 dropped 0.2% while the Dow Jones fell 0.4%.
Germany’s Dax closed up 1.2% while the Cac 40 in Paris rose 0.5%.
Sterling gained 0.02% against the dollar and one pound would buy 1.2316 dollars, and it gained 0.11% to 1.1693 euros.
In company news the owner of British Gas said its earnings will be at the top end of its previous targets.
Centrica said it has benefited from its nuclear and gas production business units, and reported that it has “managed increased commodity price volatility well” recently.
It comes as rising global energy prices have increased bills for households. The energy price cap was set at £1,971 for the average household at the start of last month, an increase of nearly £700.
Shares rose 3.5%.
The biggest risers on the FTSE 100 were Melrose Industries, up 4.05p to 111.65p, Phoenix Group, up 19.4p to 590.6p, Hargreaves Lansdown, up 25.4p to 879.4p, London Stock Exchange, up 202p to 7,252p, and Schroders, up 72p to 336.6p.
The biggest fallers on the FTSE 100 were IAG, down 4p to 123.02p, Airtel Africa, down 4p to 140.2p, Informa, down 12p to 531.4p, Endeavour Mining, down 41p to 1,915p, and Avast, down 10p to 499.3p.