A slight easing in tensions over the Ukraine saw the FTSE 100 jump 38 points, or 0.6%, to 6,766 with almost all sectors making gains in a broad-based rally. Financials and basic materials, which are particularly sensitive to broad shifts in investor appetite, made some of the biggest gains, with Max Property surging 8% on a recommended bid from Blackstone.
News that Ukrainian separatists had complied with calls from Western governments and handed over the black boxes of the passenger plane downed over Ukraine last week helped to improve investor sentiment.
'European stock markets added mild gains on Tuesday following an upbeat session in Asia amid signs that tension over Ukraine's crisis is easing, although geopolitical tensions in the Middle East remain a source of angst for market participants,' said Daniel Sugarman, market strategist at ETX Capital.
MAX Property (MAXP), an AIM-listed property company founded by Nick Leslau to invest in distressed assets, soared 13p to 168.25p after its board recommended a surprise £414 million cash bid from private equity group Blackstone. The 168.7p cash offer represents a 22% increase on Max's net asset value at the end of March. Recommending the bid the company said this was a good return for shareholders as the company had stopped investing and had nearly completed refurbishing its holdings in London and across the UK.
ARM Holdings (ARM) led the FTSE 100 higher, jumping 3.2% to 861p after the microchip manufacturer posted a 9% rise in second quarter profit, ahead of investors expectations. ARM, whose processor designs power Apple and Samsung smartphones, announced a pre-tax profit of £94.2 million for the period, ahead of the £90.9 million that had been anticipated.
Tesco (TSCO) was the biggest faller, sliding 3.6% to 278.3p as the shares gave back the gains in yesterday's relief rally after the ousting of chief executive Phil Clarke.
Royal Mail (RMG) shed 1.2% to 460.8p after reporting a decline in 1% revenue from its parcels division in the three months to 29 June and warning performance over the year would also disappoint.
'Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we anticipated,' said chief executive Moya Greene.
Jefferies analyst David Kerstens, who has the stock on an 'underperform' rating said: 'We think the impact of increased competition on profitability is likely to be substantial with a high fixed cost base.'
Outside the FTSE 100, 'mid cap' stock IG Group (IGG) was among the top performers, adding 6.7% to 613.5p after the spread betting and contracts for difference dealer said it would lift its dividend payout ratio from 60% to 70%.
Profits at the group hit £195 million over the year, slightly ahead of market expectations, but analysts at Liberum warned the increased dividend ratio could be a sign management saw little growth potential for the business in the near term, and recommended investors look to sell on rallies in the share price.