Britain's blue-chip shares rose on Tuesday, rebounding from a Europe-wide rout the previous day and helped by better-than-expected U.S. housing data which boosted global risk appetite.
Broker comments boosted insurance stocks but hit tobacco shares.
The FTSE 100 index <.FTSE> rose in tandem with U.S. stocks following the release of U.S. new home sales data, which dropped to four-month lows but came in above analysts' expectations.
The UK index closed up 0.8 percent, or 43.92 points higher, at 5,709.49.
Tuesday's rebound came after the index shed 1.9 percent on Monday, when poor European manufacturing data coupled with political uncertainty in France and the Netherlands spooked investors, but some analysts said the selloff was overdone.
Markets will now look ahead to results from the U.S. Federal Reserve's rate-setting Federal Open Market Committee (FOMC) on Wednesday and the release of first-quarter UK GDP figures, which will reveal if Britain has entered a technical recession.
Most economists polled by Reuters expect Britain scraped through with quarterly growth of 0.1 percent or slightly more in the first three months of this year, but a sizeable minority see a slight contraction.
For the UK certainly, we are forecasting a negative quarter but that is on the back of very weak construction data we had in January and February and we are struggling to see how there will be a bounce-back in March to stop it being a negative quarter for Q1 overall. That is despite construction being a relatively small part of the economy, said Azad Zangana, European economist at Schroders.
Further negative GDP figures could prompt the Bank of England to consider injecting more liquidity into the economy through asset purchases also known as quantitative easing (QE).
TOBACCO SHARES DRAG
Broker comments set the tone for the day's top winners and losers.
Both Credit Suisse and Davy Research upgraded their recommendations on the owner of British Airways and Iberia, boosting shares in International Airlines Group
Shares in UK life insurers were among the top FTSE 100 risers, led by Aviva
Disappointing bed sales and a deterioration in trading in continental Europe led Britain's biggest floor coverings retailer Carpetright
UK tobacco firms fell with shares in BAT
(Editing by Susan Fenton)