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.

EARNINGS SQUEEZE

The outlook for corporates remained testing, a picture that was painted vividly in company updates.

Thomas Cook slumped two thirds in value after the beleaguered tour operator said it could default on its borrowing and was delaying the publication of full-year results that had been due on Thursday.

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 shed 7 percent.

Homeserve fell 12.4 percent as the British home repair and insurance group said profit this year and next would be hit by lower customer numbers and restructuring costs as it deals with the impact of mis-selling concerns.

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 fell 4 percent as Iberia, which operates along with British Airways under IAG, faced potential strike action by pilots and crew over proposals to launch a new airline next year.

BAE Systems shed 1.4 percent as JP Morgan cut its target price, saying it continued to see reasons not to buy the defence contractor's shares. BAE is unlikely to outperform its peers until it can answer the question 'What happens to growth post-2013?'.

Smith & Nephew dropped 1.6 percent, as Citigroup repeated its sell rating on Europe's largest artificial hip and knee maker on concerns over its growth outlook.

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)