UPDATE 1-British shares rebound as trade sentiment tempers; Greggs on a roll

British shares bounced back as investors returned to equities after U.S. President Donald Trump predicted trade talks with China would be successful, and an appetite for vegan sausage rolls lifted baker Greggs to an all-time high. The FTSE 100 was up 0.7% after three consecutive sessions of losses. The FTSE 250 also rose 0.7% by 0818 GMT on Tuesday.

The main index rose despite China levying retaliatory tariffs on U.S. goods on Monday, taking cues from Asia where sentiment was tempered after Trump said he felt trade negotiations with Beijing were "going to be very successful". "President Trump's more conciliatory tone has offered confidence that any escalation in the short term is likely to be limited, while both sides consider their next moves," CMC Markets analyst Michael Hewson said.

Miners as well as Asia-facing financial heavyweights rebounded after steep losses in the previous session to boost the FTSE 100, while oil majors also gained. Telecom giant Vodafone fell initially, but recovered to be up 1.8% after the mobile operator slashed its dividend in order to secure enough firepower to build 5G networks and complete its acquisition of Liberty Global assets.

"The reduction to the dividend is prudent, given the enormous constraints on cash flow... even after the cut, the yield will remain punchy," said Richard Hunter, head of markets at interactive investor. "Now that the challenges are in plain sight, perhaps investors will give consideration to some of the potential for the company."

An earnings-laden day also saw support services group DCC add 2.5% after posting annual results and guiding to another year of profit growth. Among mid-caps, baker Greggs surged 11% to an all-time high after it said the popularity of its vegan sausage rolls continued to grow, leading it to hike its 2019 forecast for the second time this year.

But Renishaw skidded 5.1% after the engineering group cut its annual profit target for the second time this year. (Reporting by Shashwat Awasthi and Muvija M in Bengaluru; Editing by Peter Graff)