The markets in both London and New York heaved a collective sigh of relief yesterday. Fears that the banks were harbouring more bad news in the way of writedowns had weighed heavily on investors for weeks, so the cheers could almost be heard when the US Federal Reserve, the European Central Bank and the Swiss National Bank announced moves to enhance their liquidity-providing operations.

The news helped London’s blue-chip index to rise by nearly 2 per cent and gave a similar boost to Wall Street. A string of well received earnings together with upbeat trading updates spurred on the FTSE 100 to rise 101.5 points to 5,420.7.

It was a good day for insurers with Admiral, up 89p to 914p, and Aviva, gaining 40¾p to 507½p, among the biggest risers of the day. Aviva agreed a £1 billion cash payout to more than a million of its with-profits policyholders in a deal that also looks good on paper for the company’s shareholders.

With first-half profits at Admiral soaring 16 per cent to £100.3 million, the owner of Confused.com and Elephant.co.uk also increased its dividend by 26 per cent to 26p.

First-half earnings from can maker Rexam, up 33p to 380½p, and consumer lender Provident Financial, up 74½p to 894½p, also added to the buoyant mood.

Miners were big gainers, with an upbeat outlook from Anglo-Swiss giant Xstrata sending its shares 212p higher to £36.47, and Vedanta Resources, up 151p to £20.40, extending Monday’s rally.

British Airways picked up where it left off on Monday, rising 14½p to 263p as several brokers upgraded their ratings after Monday’s news that the airline was in merger talks with Iberia, the Spanish carrier.

Russia-focused oil group Imperial Energy rose 48p to £10.06, on talk of a new bid approach, possibily from the miner ENRC, up 54½p to 987½p. Imperial admitted this month that it was in talks over a possible £12.90 per share offer, believed to be from the Indian company ONGC. A formal offer is expected within weeks.

Lloyds TSB was the biggest casualty of the day, slipping 15p to 306p, after first-half net profit at the bank fell 62 per cent because of further writedowns and higher impairments.

Supermarket giant Tesco, down 0.1p to 373.3p, was hit with its second debt downgrade in as many days. Moody’s cut its rating to A3 from A1, saying its credit status would “significantly deteriorate” in the current financial year.

Gloom on the housing front continued and housebuilders were back among the losers in the second tier after a negative note from broker Cazenove. Taylor Wimpey was down 2¼p to 42½p, Barratt Developments lost 5p to 100p and Bellway fell 24p to 491½p.

But Robert Wiseman Dairies rose 21¾p to 337p after increasing its contract with the CoOperative, to service stores in the South East from late September. The contract will add 50 million litres to Wiseman’s annual sales volumes.

New York: Wall Street stocks climbed for a second session after the Federal Reserve took steps to enhance the emergency liquidity measures, backstopping the downtrodden banking sector, and a bump in oil prices boosted energy stocks. The Dow Jones industrial average closed up 186.10 points at 11,583.70.

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