The City showed just how capricious it could be yesterday: the market was nearly written-off as another day in the red when buyers came back in looking for bargains during the afternoon session. What would have been the fourth day of falls, prompted by fears of an end to central bank monetary stimulus, was turned around by bargain-hunters who pushed the benchmark index up five points into the green.
Michael Hewson, an analyst at CMC Markets UK, said: "The markets staged a remarkable turnaround after dropping sharply on the open in the wake of the 6.35 per cent decline in the Nikkei overnight."
The FTSE 100 added 5.18 points to 6,304.63 – although it is still back at April levels and May's rally has been wiped out.
William Nicholls, a dealer at the spread-betting group Capital Spreads, said: "We will have to wait and see if this price represents fundamental value to investors or whether the sell-off continues. The markets will now wait with baited breath for [US Federal Reserve chairman] Bernanke's comments next week."
Top of the table was the outgoing Russian miner Evraz. Traders put its 5.8p rise to 119.5p yesterday down to a short squeeze. Hedge funds and investors had been shorting the stock ahead of its reshuffle out of the FTSE 100. These short positions are now being unwound, pushing the price up.
Some of the bargain-hunters were focusing on the oil services group Petrofac. Analysts at Citi rated it a buy and pointed out the company's pipeline of new developments as a reason to pile in.
It has been the seventh-worst performer in the year to date on the blue chips, but Citi's Ryan Kauppila said the shares now stand at a 10 per cent discount to the sector. He made it his most-preferred stock because the large projects that are due to complete will boost earnings. He gave it a 1,600p price target and the shares added 36p to 1,297p.
Royal Bank of Scotland was out of favour – the worst performer on the index, down 10.6p to 315p – following Thursday's news that chief executive Stephen Hester will leave. However, Investec said that rival bank HSBC is worth a look. It raised its target from reduce to buy and reckons punters could be in for a 6.1 per cent dividend yield by 2015.
Investec thinks the reason to buy is clear: it is a "significantly de-risked bank … with surplus capital generation which requires a home".
But HSBC dipped 1.7p to 690.4p, joining other financial stocks in the doldrums.
Scribblers at Goldman Sachs like FTSE 250-listed Aveva – the provider of software for the design of oil rigs, ships, power stations and chemical plants. They recommend it as a buy, and think market concerns of a slowdown in oil services spending "are overdone".
They think a large part of Aveva's exposure is in offshore, where spending "has been very resilient". The endorsement from Goldmans didn't help the shares and it retreated 37p to 2,213.5p.
The student accommodation business Unite has raised £51.2m via a placing of new shares to fund regional development opportunities. It was 12.4p weaker at 335.1p.
On Aim, Ingenious Media Active Capital announced the sale of Digital Rights Group, which owns the licensing rights to hit TV shows such as Doc Martin and The Inbetweeners, for £13.2m. Patrick McKenna's Soho-based Ingenious Ventures manages Imac and sold Digital Rights to the Swedish media group Modern Times Group. Ingenious broadcast a 4.8p rise to 13.75p.
The leather goods brand Mulberry reported an expected 28 per cent slump in annual profit, with profit for the year to April at £26m. It is refocusing its business on overseas markets and taking the brand more upmarket, with new store fits and wider product range.
Philip Dorgan, an analyst at Panmure Gordon, said: "Taking Mulberry up a notch in the luxury sector will take time and involves investment in a more fully rounded global proposition."
The shares edged down 18.5p to 930p after falling 8 per cent on Monday when it was announced that its creative director, Emma Hill, would leave the business after nearly six years.