Britain's top share index bounced higher by midday on Wednesday, with banks and miners rallying on hopes the International Monetary Fund would bolster its lending resources significantly to insulate economies from Europe's debt crisis.
London's blue-chip index <.FTSE> was up 8.49 points, or 0.2 percent at 5,702.44, by 1139 GMT, rebounding from a session low of 5,647.92, although the index failed to significantly breach resistance around 5,700.
Banking <.FTNMX8350> and mining <.FTNMX1770> shares, the riskiest equities on the UK's benchmark index, recovered losses after a media report said the IMF was looking at a possible $1 trillion (650 billion pounds) expansion of its lending facility to help safeguard the global economy from the euro zone's debt crisis.
There is a huge wave of liquidity that the market is expecting to hit, and as a result we're seeing equities and commodities rallying on the back of it, David Morrison, strategist at GFT Global, said.
We know the Bank of England is likely to introduce further quantitative easing in February ... There's talk of the European Central Bank extending its long-term refinancing operations dramatically and there is still the possibility the (U.S.) Federal Reserve may do something in the early part of this year to provide further stimulus.
Banks, which have large exposure to Europe's debt woes, initially opened lower after U.S. peer Citigroup
So the IMF report lifted sentiment in the sector, whose earnings outlook relies heavily on the survival of the European Union.
Royal Bank of Scotland
There was also relief after Germany saw good demand, and yields fall, at its most recent bond auction, while debt-laden Portugal also saw borrowing costs fall.
Other financials rallied too, with insurance buyout vehicle Resolution
Traders said Man's shares had priced in much of the bad news, having lost more than a third of their value over the last three months.
As investors reflected on the more positive media reports on the IMF, those stocks perceived as defensive fell slightly, although FTSE 100 volume was low -- just 30 percent of its 90-day average -- highlighting traders' lack of conviction.
Cigarette maker Imperial Tobacco
It rose 10.3 percent after saying it expects to challenge a ruling by India's Supreme Court that means it will no longer be able to defer payment of a sales tax, having hitherto benefited from deferrals of $1.24 billion.
Elsewhere, BT Group
Pay-TV broadcaster BSkyB
British publisher Pearson
Wall Street futures pointed to a higher open on Wednesday, supporting the turnaround on the FTSE 100, ahead of a raft of data including: the producer prices index, due at 1330 GMT; industrial output data for December, due at 1415 GMT; and the U.S. homebuilder sentiment index.
(Editing by David Hulmes)