Last checked at 
(Alliance News) - Stock prices in London closed sharply higher on increased confidence that a full-blown banking crisis has been avoided, following concerted action across the globe.
Oanda analyst Craig Erlam said "markets are clearly comforted by the measures that have been put in place".
"If this can be followed by a few days of calm with no other banks emerging as being at risk of collapse without major intervention, stock markets could continue to recover," Erlam added.
The FTSE 100 index closed up 132.37 points, 1.8%, at 7,536.22. The FTSE 250 ended up 283.97 points, 1.5%, at 18,779.10, and the AIM All-Share closed up 7.74 points, or 1.0%, at 804.96.
The Cboe UK 100 ended up 1.9% at 754.14, the Cboe UK 250 closed up 1.7% at 16,354.31, and the Cboe Small Companies gained 0.5% at 13,352.77.
Banking stocks led London's lead index higher with Lloyds, Barclays, NatWest and Standard Chartered rising 4.4%, 5.2%, 5.9% and 4.7%, respectively.
In European equities on Tuesday, markets also reflected the more buoyant mood. The CAC 40 in Paris ended up 1.5%, while the DAX 40 in Frankfurt jumped 1.8%.
US Treasury Secretary Janet Yellen signalled further US government backing for deposits at smaller American banks if needed, a shift that seeks to protect parts of the country's banking system struggling in the recent financial turmoil.
After signs that panicked depositors pulled savings out of regional banks in recent days, the US Treasury Secretary said guarantees offered to all depositors at the failed Silicon Valley Bank could be replicated at other institutions if needed.
"The steps we took were not focused on aiding specific banks or classes of banks," Yellen said in a speech to the American Bankers Association on Tuesday.
"Our intervention was necessary to protect the broader US banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion."
Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average up 0.4%, and the S&P 500 and the Nasdaq Composite each 0.6% higher.
The dollar was mixed on the eve of an eagerly-anticipated US interest rate decision, recovering lost ground after banking sector turmoil led to a re-pricing of Federal Reserve expectations.
The pound was quoted at USD1.2192 at the London equities close Tuesday, down from USD1.2270 at the close on Monday. The euro stood at USD1.0778 at the European equities close Tuesday, up against USD1.0723 at the same time on Monday. Against the yen, the dollar was trading at JPY132.29, higher compared to JPY131.47 late Monday.
The Federal Reserve started its two-day meeting Tuesday, with a decision on interest rates due tomorrow at 1800 GMT.
According to the CME FedWatch tool, markets believe there is a 78% chance the US central bank will lift interest rates by 25 basis points on Wednesday, with the remaining 22% expecting rates to stay at their current level.
Earlier this month, before the recent banking industry turmoil, which began with the collapse of Silicon Valley Bank, a 50-point hike was considered possible.
The Bank of England will make its monetary policy call on Thursday.
Kallum Pickering at Berenberg thinks the "outbreak of stress across the Western financial system and the resulting tightening of financing conditions reduce the need for further rate hikes by the bank".
He expects the BoE to hold the bank rate at 4.0% at the meeting.
The UK government borrowed a record amount in February to support spending on energy support schemes, according to the Office for National Statistics.
Despite this, analysts at Pantheon Macroeconomics said that the Office for Budget Responsibility's borrowing forecast for the financial year as a whole, which ends this month, remains "in the right ball park".
UK public sector borrowing - excluding public sector banks - totalled GBP16.7 billion last month. This compared to GBP7.0 billion in February of last year.
The ONS said this was the highest February borrowing since monthly records began in 1993, largely due to substantial spending on energy support schemes.
Analysts at Capital Economics said: "Despite February's worse-than-expected public finances figures, we still think the chancellor may have more headroom to cut taxes/raise spending later this year."
"But the big risk is that a further escalation in the banking crisis causes a deterioration in the fiscal outlook as the hit to the public finances from weaker economic growth is only partially cushioned by lower gilt yields."
In corporate news, Kingfisher reported a sharp drop in annual profit, as the lockdown boom in do-it-yourself house projects continued to ebb. Shares fell 2.0%.
AJ Bell analyst Russ Mould said the retailer was "always going to struggle" to sustain growth momentum, after the DIY boom during the pandemic which helped boost its financial 2022 results.
"The success during the pandemic effectively gave Kingfisher a new lease of life following years of struggles. Like many Covid winners, the DIY group will be hoping its recent success lives on and doesn't fade away. It cannot be accused of sitting on its hands, but equally there is a risk that it has bitten off more than it can chew," Mould explained.
In the financial year that ended January 31, the B&Q-owner reported a pretax profit of GBP611 million, down 39% from GBP1.0 billion the year prior.
This reflected lower operating profit and the impact of impairments following significant increases in discount rates and revised future projections, the London-based company explained.
Adjusted pretax profit was GBP758 million, down 20% from GBP949 million. It had been forecast by market consensus to decline 22% to GBP741 million.
Manx Financial Group shares surged back toward their all-time high after the company reported a 70% increase in profit for the past year.
The owner of Conister Bank and an assortment of lending, leasing, broking and financial advice firms said its financial performance represented a record year, despite the economic backdrop.
Pretax profit increased to GBP5.2 million from GBP3 million, helped by Conister Bank increasing lending 9% to GBP231.4 million and the net interest margin increasing GBP6.4 million thanks to the Bank of England interest rate increases.
Executive Chair Jim Mellon said "we are well-positioned to support the growth in profitability for 2023". The shares jumped 27% and ended near January's all-time high of 29.75 pence.
Oil prices rose as investors slowly returned to riskier assets after the banking turmoil. Oil majors BP and Shell climbed 3.2% and 3.1% respectively.
Brent oil was quoted at USD74.42 a barrel at the London equities close Tuesday, up from USD72.31 late Monday.
In contrast, the safe haven qualities of gold were in less demand. The price of the yellow metal fell to USD1,943.19 an ounce at the London equities close Tuesday, against USD1,977.65 at the close on Monday.
In Wednesday's UK corporate calendar, there are full year results from housebuilder Vistry and car dealer Pendragon.
The economic calendar for Tuesday has UK inflation figures at 0700 GMT and the US interest rate decision at 1800 GMT.
By Jeremy Cutler, Alliance News reporter
Comments and questions to newsroom@alliancenews.com
Copyright 2023 Alliance News Ltd. All Rights Reserved.
