THOUSANDS of retail investors joined sharp-witted institutions in making millions of pounds from the short-lived collapse in share prices that followed the terrorist strikes in London on Thursday.

BP and Vodafone were among Britain’s largest companies that took advantage of the volatile markets to improve their balance sheets.

City Index, the financial spreadbetting firm, said that more than 8,000 retail investors had dived into the market on Thursday, correctly backing their hunch that share prices would quickly bounce back.

Some will find profiting from horror distasteful. But many in the City applaud the resilience of capitalism.

The opportunity was created by automatic trading systems, used by institutional investors, that began dumping stock when shares fell sharply on news of the blasts. At one point the FTSE 100 lost 100 points in two minutes and at its lowest was showing a 4% fall.

“Despite the awful news, a considerable amount of people were trading and making a lot of money,” said Clive Cooke, chief executive of City Index. “We were deluged with buyers, it was mayhem. In this electronic age, instead of being shell-shocked, investors got straight on to their PCs and took the opportunity to make money.”

It was the busiest day of trading for more than two years. The London Stock Exchange said 4.75 billion shares were traded on Thursday compared with the recent daily average of about 3.1 billion.

“We haven’t had such a busy day since March 2003, just before the Iraq war,” said Ian Jenkins, head of spreadbetting at Cantor Fitzgerald.

Private investors were buying financial instruments that allowed them to take a leverage position either in the index itself or in leading shares. Investors had been sitting on their hands, concerned the stock market was too high with the FTSE 100 rising to about 5,200 on Wednesday.

BP and Vodafone, two of Britain’s largest companies, took advantage of the sudden slump in the value of their shares. BP bought in 7.4m shares, some for as little as 601½p. This was close to the intra-day low that its shares hit as the market plummeted at around 10.30 on Thursday morning. BP bought about twice as many of its own shares as its average daily purchase over the past four weeks.

Vodafone also took advantage of the share-price fall, spending £74m to buy in 55m shares at around 135p. Only the previous day, it had bought in millions of shares at close to 139p.

Thursday’s attacks coincided with fresh gloom about the economy. “The Madrid experience suggests there will be a relatively limited economic and market fallout from the terrorist attack — provided it is isolated,” said Michael Dicks, an economist with Lehman Brothers. “But the economy was in any case undergoing a broad-based slowdown.”

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