The top share index rose in volatile midsession trade on Thursday after eight straight days of losses, albeit in wafer thin volumes, with the U.S. closed for the Thanksgiving holiday and as European debt concerns linger.
Miners and banks, beaten down in previous sessions, rose, helping keep the FTSE 100 <.FTSE> up 32.65 points, or 0.6 percent to 5,172.43 by 12 p.m.
Chilean miner Antofagasta
The FTSE 100 is on its worst run since mid-January 2003, as concerns over the fate of the euro zone have forced investors to sell riskier assets.
Markets are starting to price in a worse-case scenario (euro zone break up), but markets will still be volatile for the foreseeable future and I think are still some way off the potential low if the domino effect really kicks in, Martin Dobson, director at Westhouse Securities, said.
With little volume behind the session's rise so far -- the FTSE 100 has traded just 29 percent of its already thin average 90-day volume -- traders said the index would be unlikely to be able to hold onto gains, with lingering doubts over the sustainability of global growth in the face of mounting debt concerns.
In a reminder of just how desperate the situation in the euro zone is, Fitch ratings agency joined Moody's in stripping Portugal of its investment grade rating with a negative outlook for the economy.
And British banks were warned by a top regulator that they needed to plan for a potentially disorderly break-up of the euro zone, or the exit of some countries as part of their contingency planning, as the sovereign debt crisis showed no sign of abating.
After a disappointing auction of German bonds on Wednesday analysts worried the increasingly risk-averse mood in markets would dry up liquidity.
Who is going to buy all this debt? Especially given the current environment -- recession looming, political ineptitude, mass austerity etc ..., Louise Cooper, markets analyst at BGC Partners, said.
The euro zone's debt crisis is having a profound effect beyond its own borders, with Britain confirming its economy grew just 0.5 percent in the third quarter of this year.
Bank of England policymaker David Miles predicted very low growth for Britain over the next few quarters and did not rule out further quantitative easing to help boost growth.
That followed weak manufacturing data in China and the U.S. and poor industrial data from the euro zone on Wednesday.
With governments adopting austerity measures to combat swelling debt piles the high street, a barometer for consumer confidence, was a major focus.
Its shares rose 11 percent, having fallen sharply ahead of the results, with Espirito Santo saying the outcome was slightly ahead of expectation.
Arcadia, the Top Shop-to-Bhs British retail group owned by billionaire Philip Green, added to the bad news coming from the high street, posting a 38 percent fall in full-year profit.
Defensive stocks littered the fallers list as investors bought on the dips in riskier assets.
(Additional reporting by Tricia Wright; Editing by Helen Massy-Beresford)