The top share index was higher at midday on Tuesday, with financials and miners among the top performing stocks amid bargain-hunting following six days of falls.
London's blue-chip index <.FTSE> was up 41.95 points, or 0.8 percent at 5,264.55 by 11:54 a.m., having fallen 5.8 percent in the past six sessions.
The FTSE volatility index <.VFTSE>, a gauge of investor fear, cooled, having risen earlier this month along with Italian and Spanish government bond yields.
Banks rose 1.6 percent, and with little fresh news from the embattled euro zone, investors clung to morsels of hope as reasons to buy beaten-down equities.
Traders said the move by two top ratings agencies -- Moody's and Standard & Poor's -- to say the failure in the United States to reach a compromise over deficit reduction plans would not trigger an immediate downgrade of the sovereign credit rating, could be taken as a small positive.
David Miller, partner at Cheviot which manages 3.5 billion pounds of assets, said investors should not be too worried about the situation in the United States.
The leading economic indicators are good and manufacturing is certainly in much better shape. Furthermore, the markets know that a lack of help from politicians increases the likelihood of tangible help from the Fed.
Helping prop the FTSE up, was the prospect of a rebound for U.S. equities when Wall Street opened later on Tuesday, ahead of data including U.S. third-quarter preliminary GDP, due at 1:30 p.m.
Miners, which have lost more than a quarter of their value in 2011, gained too, aided by rebounding metal prices on the back of data overnight from China which showed robust demand from the world's most voracious consumer of raw materials.
The outlook for corporates remained testing, a picture that was painted vividly in company updates.
Evolution analyst James Hollins said it was shocking that Thomas Cook needed to renegotiate its financing just 32 days after a previous deal with lenders was agreed.
Legitimate questions will be asked as to whether Thomas Cook can survive long-term and/or whether there is any value left in its equity, Hollins said.
Peer TUI Travel
Peel Hunt said it was looking to cut its forecasts by up to 20 percent, as the broker repeated its sell rating.
International Consolidated Airlines
Smith & Nephew
We leave 2011 sales unchanged but lower future years by 1 percent ... We feel the orthopaedic industry is going ex-growth with double-digit earnings growth no longer possible.
(Editing by Dan Lalor)