The top share index was higher in volatile mid-session trading amid speculation Greece may call off plans to hold a referendum on austerity measures.

The Greek government was on a knife edge ahead of a confidence vote tomorrow, when Parliament is due to decide on whether to hold a plebiscite on the EU bailout package.

Finance Minister Evangelos Venizelos cast doubts over the plan by saying his country's euro membership was a historic achievement and cannot depend on a referendum.

Traders said markets had reversed losses on the hope that, should the Greek government fall, the referendum may not happen.

If Papandreou's government falls we may not get a referendum on bailout, however I don't see that a new coalition will easily be formed or that it will automatically sign up to bailout, Darren Sinden, a trader at Silverwind Securities, said.

Miners <.FTNMX1770> and banks <.FTNMX8350> supported the blue-chip index, reversing early losses amid revived appetite for risky assets.

However, the mood remained cautious after France's biggest listed bank BNP Paribas slashed its exposure to Greece, Italy and Spain by more than 12 billion euros in a bid to protect its balance sheet as the euro zone debt crisis threatens to deepen.

London's blue chip index <.FTSE> was up 36.19 points, or 0.7 percent to 5,520.29 by 1219 GMT, bouncing off a low of 5,402.63, in thin volumes.

If (the FTSE 100) holds above 5420 the outlook improves, while a drop back through 5350 would be a pretty bearish development, Bill McNamara, technical analyst at Charles Stanley, said.

The recent rally faltered as it came into contact with the 200-day Moving average -- around 5,710 -- last Thursday. McNamara says that such price action indicates that the overall tenor of the market remains fairly negative.


Earnings news provided some support, with BT Group < BT.L> jumping 3.68 percent on the back of estimate-beating core profits and sales in the second quarter.

Food and ingredients firm Tate & Lyle was the top blue chip gainer, up 3.63 percent, after its above-forecast 38 percent jump in second quarter net profit.

RSA Insurance added 4.65 percent as it said it was on track to meet its full-year goals.

ITV was up 4.31 percent as Credit Suisse retained its bullish stance on the stock ahead of its third quarter update, due on November 13.

On the flip side, life insurer Aviva fell 0.2 percent after seeing its sales fall in the first nine months of the year, reflecting tough conditions in its key European markets.

Investors watched out for developments in Frankfurt where Mario Draghi is due to hold its first policy meeting as ECB President.

While rates are seen on hold, a cut in January is believed to be a growing possibility. The central bank is also under pressure to intervene in the bond market to stem the impact of the Greek crisis.

Futures on Wall Street were trading higher ahead of U.S. initial weekly jobless claims, due to be released at 1330 GMT, with October's non-manufacturing ISM index, and revised September durable goods orders due at 1500 GMT. All-important new farm payrolls are due for release on Friday.