Cadbury Schweppes was among just four blue chip stocks to end in the red yesterday as sentiment switched from panic selling to buying.

The FTSE 100 closed up 266.5 at 5,875.8, nearly 5 per cent higher, but Cadbury Schweppes fell 2 per cent, hit by a warning from its struggling US rival Hershey.

Hershey – sometimes seen as a potential Cadbury merger candidate, although its controlling trust is thought to be more interested in turning the business around - gave warning that input costs had increased dramatically in 2007 and that it expected commodity and energy costs to increase at similar levels this year.

Cadbury, which is to report full-year figures next month, fell 11½p to 552½p. Last month it said it was aiming to raise prices in 2008 to offset input costs that would be up to 6 per cent higher.

London shares were buoyed in common with global stock markets by talk that there were plans afoot to bail out the monoline bond insurers. Morgan Stanley earlier this week said that US authorities would realise they are too important to fail.

There was also a feeling that after rogue-trader losses for SocGen, the worst of the bad news around banks may now be out of the way. Traders reported big futures trades in the first three days of the week and the frantic unwinding of SocGen’s positions at that time may well have weighed on European shares.

HBOS duly rose 60½p to 693½p, Royal Bank of Scotland 33¾p to 400¼p and Barclays 36½p to 491p.

Icap, up 82p at 666p, and London Stock Exchange, up 173p at £17.51, were led higher by strong trading statements with both saying they had benefited from record volumes. Schroders, the fund manager, was dragged up 124p to £11.06 with them.

Miners also rebounded, despite talk that Brazil’s Vale was being discouraged from bidding for Xstrata by the Brazilian Government, which is said to believe the deal is too complicated and expensive. Xstrata initially fell 166p, but closed up 33p at £33.93 on the general euphoria.

BAE Systems was off 1½p at 458p after VT Group said that there was still no date for its joint carrier project to begin with BAE. However, Panmure Gordon said the fact that the Government had committed itself to the deal should be good news. There is talk of February completion.

Carphone Warehouse fell 4¼p to 287¾p after Goldman Sachs placed 1.3 per cent of the company at 275p.

Despite the rally, there are still jitters aplenty. Severfield-Rowen, the structural steel manufacturer, plunging 144¾p to 245p after it said 2008 profits would be hit by a slowdown in London commercial property projects and in out-of-town retail developments nationwide. The market seems to be expecting a far worse downturn than ABN Amro, which cut its 2008 profit forecast to £50 million, from a £57 million consensus.

St James’s Place, the wealth manager, soared 66p to 310p as it defied expectations with 23 per cent growth in new business in 2007’s final quarter.

New York: US shares finished higher after government leaders agreed on an economic stimulus plan to try to avert a recession. The Dow Jones industrial average closed up 108.40 points at 12,378.60.

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