The top share index rose on Friday, as Italy's senate began debating a package of austerity measures demanded by the European Union to avert a euro zone meltdown.

In a sign investors remained on edge, defensive stocks helped the UK's benchmark index <.FTSE> remain in positive territory, up 26.95 points, or 0.5 percent to 5,471.77 by 1132 GMT, although volumes were painfully thin as investors kept to the sidelines because of the ongoing uncertainty in Europe.

London's blue chips are on course for their second consecutive weekly loss, weighed by concerns over European debt contagion and having risen sharply in October.

UBS tactically downgraded global equities to neutral from overweight, two weeks after it upgraded the asset class from benchmark in its model portfolio.

Rising political risk in Europe presents clear downside risks to global equities in the near term. We believe upside potential is somewhat limited given strong gains seen in October, it said.

Citigroup analyst Jonathan Stubbs said investors should stay in risk management mode with equities remaining range-bound and buy into weakness, he said, highlighting big cheap defensives such as Vodafone and Unilever .

Drugmaker GlaxoSmithKline and British American Tobacco rose up 0.8 percent.

Top gainer was British Airways and Iberia owner IAG , up 4.9 percent after raising growth and cost savings targets and saying it expected an operating profit of around 1.5 billion euros ($2 billion) in 2015, which broker Davy said was a positive for the company.

British aero engine maker Rolls-Royce added 2 percent after saying it expects to deliver strong growth in full-year profit, shrugging off turmoil in financial markets.

Schroders rose 4.5 percent as Deutsche Bank upgraded the fund management group to hold from sell, saying the harsher climate is now priced in, and pointing to Thursday's third-quarter profit beating forecasts.

BG BRAZIL CONCERN

On the downside, the major faller was Brazil-exposed gas producer BG Group . It fell 1.9 percent with traders citing a read across frim Portuguese oil firm Galp Energia .

Galp's shares shed more than 9 percent after the sale of a stake in its Brazil deep-sea oil business to Chinese state-owned oil firm Sinopec Group put a weaker-than-expected value on its assets there.

The read across for BG Group is negative ... because you've got to question whether if they wanted to sell those assets then they're not actually as valuable as we might have been thinking, Santander analyst Jason Kenney said.

Traders said they were keeping a close eye on Italian bond yields for signs of stress ahead of the senate's decision on the austerity package, but having been approved by the upper house budget committee on Thursday the law is seen being passed easily.

Investor nerves have been calmed as both Greece and Italy sought to end political uncertainty in their countries by moving towards interim leaders.

Italian 10-year bonds cooled to around 6.57 percent, helped by bond buying by the European Central Bank, having risen to around 7.5 percent earlier in the week when it looked like political uncertainty would trigger a bailout request from Europe's third biggest economy.

Worries persisted over Greece where prime minister designate Lucas Papademos has 100 days to start fulfilling the terms of a 130 billion euro (111 billion pound) bailout plan aimed at keeping Greece solvent even as economists voice doubts over the euro zone's future.

Helping the FTSE stay in positive territory, U.S. stock index futures pointed to a higher open on Wall Street on Friday, having been boosted by a fall in U.S. claims for unemployment in the previous session pointing to a slight improvement in the economy.

Across the Atlantic, November's preliminary Reuters/University of Michigan consumer sentiment index will be released at 1455 GMT, with a reading of 61.5 forecast, up from 60.9 in October.

The U.S. bond market and government offices will be closed on Friday for Veteran's Day, although the U.S. stock market will remain open.

(Editing by Jon Loades-Carter)