The FTSE staged a recovery on Thursday as bargain-hunters moved in on beaten-down financials after sharp falls in the previous session, although the advance, in painfully thin volumes, looked fragile.

Insurers were among the top performers, led by a 10 percent jump in Old Mutual , as news of the planned $3.2 billion (2.0 billion pounds) sale of its Nordic business cheered investors and analysts who said the deal will help cut Old Mutual's debt and boost shareholder returns.

By 1236 GMT, the FTSE 100 <.FTSE> was up 41.26 points, or 0.8 percent, at 5,408.06, but having only traded 26 percent of its 90-day average. The index dropped 2.3 percent on Wednesday.

Traders said that only a serious piece of positive news will lure investors, many of whom are looking to square positions as December grinds on, with jitters surrounding Europe's debt situation draining confidence.

Nothing's changed in terms of the European situation. The more investors are looking at what happened at the summit last week, the more disappointed they're becoming, Richard Hunter, head of equities at Hargreaves Lansdown, said.

The temptation for investors to come back into the market before the year end now is really going to have to be a big one, he said.

Henk Potts, market strategist at Barclays Wealth, said that while the summit agreements that have been made were a big step in the right direction, the concern is that they have the potential to be diluted as they go through the drafting process.

We've seen it so many times when the original communique is very positive, forward pointing and reasonably aggressive in terms of meeting market expectations but the delivery and the execution tend to fall short of the original comments.

Risk-sensitive banks <.FTNMX8350> rose on Wednesday, as the market took some encouragement from a successful Spanish bond auction.

The sector had come under heavy pressure in the previous session after Italy's borrowing costs rose to a record high, and on revived fears of a possible sovereign credit rating downgrade for France.

David White, trader at Spreadex, was relatively upbeat about the prospects for risk assets, saying that they may offer more than the market is currently willing to pay for them.

In times of market stress, risk appetite dwindles and time horizons shorten, potentially undervaluing assets by replacing participants' diligent valuation with short-term anxiety and margin calls, he said.

This binary pricing mechanism could provide those with longer-dated time horizons an opportunity to earn not only a risk premium but an anxiety premium, too.

Nicolas Suiffet, analyst at Trading Central, said risk for the FTSE 100 remains to the downside, and to expect a decline to Fibonacci levels at 5,350, the 50 percent retracement level from the November 25 to the December 7 up move, and to 5,288, the 61.8 percent level, looking at the technical view on December 2011 futures on an intraday basis.

He added that only a push above 5,435, a former horizontal support which has been broken, would reinstate a positive bias.

Investors were waiting for a raft of U.S. economic data, including November's Producer Price Index and industrial production figures.

(Additional reporting by Jon Hopkins; Editing by Jon Loades-Carter)