The top share index rose on Wednesday, regaining half the previous day's fall and bucking a three-day slide, buoyed by earnings news and U.S. data in a volatile session that was overshadowed by the hazy euro zone debt-crisis outlook.
Mining and oil firms were among the best performers, helped by rising crude and metals prices, as well as earnings from the likes of Randgold Resources
The FTSE 100 <.FTSE> swung in a 110-point range before settling up 1.2 percent, or 62.53 points, at 5,484.10. It had fallen 2.2 percent Tuesday and 5.2 percent over the course of the previous three days.
The closing level left the blue-chip index just above the 61.8 percent Fibonacci retracement of its August selloff, although some 300 points off the previous week's intraday high.
While buyers had emerged to buy on dips, given the scale of the recent selloff, the underlying tone was still bearish, traders said. Bond markets mirrored the sentiment as peripheral euro zone bond yields continued to remain high.
Most of the buying we've seen is people topping up on defensive positions into a little bit of weakness earlier, and people closing down short positions, Andy Ash, head of sales at Monument Securities, said.
Yesterday there were a lot of people who panicked, with lots of puts bought -- the put-call ratio was as extended as it's been for a year or so. Then they get up today and think 'why did I panic?', which fuels the rally a little bit.
After falling sharply Tuesday on Greek plans for a referendum on its bailout package, German, French and Greek leaders met for crisis talks in Cannes and the latter was told it had until mid-December to decide if it wants to stay in the euro zone.
The meeting comes before a G20 leaders' meet in the same city Thursday which will discuss the debt crisis and global growth outlook, which is showing signs of further dislocation between Europe and the United States.
U.S. ADP jobs data came in stronger than expected on Wednesday, helping Wall Street to post further gains and dragging European bourses higher, in contrast to weakening euro zone factory data.
The U.S. Federal Reserve, meanwhile, offered a slightly brighter U.S. economic outlook but again highlighted downside risks, including Europe's debt crisis, and did not discount further intervention.
Mike Cuthbert, head of financials at Canaccord Genuity, said the market was still very, very twitchy either way... it's very hard to trade this market at the moment. It swings around on the moves of the politicians. The normal rules of investment have often been suspended.
Cuthbert said looking at the book, we've probably got more sells on the pad looking for people to take advantage of this bounce, and overall, I think, it's still pretty bearish.
EARNINGS LARGELY BEAT
Earnings news also provided some support, with Randgold Resources up more than 7 percent after it posted a strong gain in third-quarter output and profit, and said it was still looking at a record fourth quarter.
Among the other gainers, Next ended up 6.5 percent after online sales helped it to a third-quarter beat, while Inmarsat ended up nearly 4 percent as it also beat forecasts.
Worst hit throughout most of the session was Lloyds Banking Group
The chunky volume, ahead of its trading update on November 8, helped push volume on the broader index to nearly 150 percent of its 90-day average, which made it much more active than the German <.GDAXI> and French <.FCHI> bourses.
Fellow lender Standard Chartered
While volatility on the FTSE <.VFTSE> pulled back slightly over the course of the day, down 4 percent, with some of Tuesday's sellers buying back in at a profit, Trevor Coote, head of equity sales at Alexander David Securities, said he remained bearish over the short term.
Coote said he expected the market to fall to 5,200 points by the end of the week before extending losses to 4,900, although he still expected a bounce back to 5,600-5,800 by the year-end courtesy of a Christmas rally.
(Editing by Mike Nesbit)