FTSE ends up on oils and banks

By Dominic Lau

LONDON (Reuters) - The top share index rose for the second day on Tuesday, recovering more of last week's heavy losses, but investors remained nervy despite Washington's plan to take stakes in its banks to support financial markets.

The FTSE 100 .FTSE ended up 3.2 percent at 4,394.2, well off its high of 4,534.4 after the Dow .DJI and the S&P 500 .SPX pared earlier gains, and the Nasdaq .IXIC turned negative as investors sold technology shares on fears that fall-out from the credit turmoil would hurt profits.

The UK benchmark posted its second best one-day percentage rise ever on Monday after plummeting 21 percent last week -- the index's second worst weekly fall ever -- on liquidity strains and global recession fears. The index is down nearly 32 percent this year.

Energy stocks were the top-weighted gainers, holding onto their earlier gains despite crude prices turning lower in afternoon trade. BP (BP.L) and Royal Dutch Shell (RDSa.L) rose 6.8 and 5.6 percent, respectively.

The U.S. Treasury said it would pump $250 billion into U.S. banks in an effort to thaw frozen credit markets.

Treasury Secretary Henry Paulson said nine banks that he called "healthy institutions" had agreed to accept government stakes for the good of the U.S. economy, though he did not name the banks.

Beaten-down banks were mostly firmer, with the FTSE 350 .FTNMX8350 rising 2.8 percent. But the three banks that will take government cash -- Royal Bank of Scotland (RBS.L), Lloyds TSB (LLOY.L) and HBOS HBOS.L -- were down between 1.1 and 6.6 percent, extending Monday's losses.

"We are going to see banks being nationalised or part-nationalised over the next six to 12 months. There are going to be some big names there, and that's going to be a shock to the system," said Martin Slaney, head of derivatives at GFT Global Markets.