The FTSE 100 regained its poise after Monday’s heavy losses, rallying 1.7 per cent, on hopes that politicians in Washington would find a way to pass a $700bn bail-out package for the US financial system. However, the London market still recorded its biggest monthly fall since October 1987.

Aided by rumours of possible emergency interest rate reductions across Europe, the FTSE 100 finished the session 83.7 points, or 1.7 per cent, higher at 4,902.4, while the FTSE 250 added 95.3 points, or 1.2 per cent, to 7,888.2.