Britain's top share index rebounded from a three-session slide on Wednesday as a rise in banking stocks following a positive broker comment and gains in mining shares boosted the index.
The FTSE 100 index closed up 39.19 points, or 0.7 percent, reversing a downward spiral when the index surrendered almost all its remaining 2012 gains after it fell 2.2 percent on Tuesday, its second biggest percentage fall of the year.
The index dipped briefly below the 200-day moving average around the 5,695 level, which is also near 2012 lows, before bouncing back.
This appears to be a normal trading bounce following a selloff mainly driven by bargain hunting and short covering. Current downtrends remain intact, a London-based trader said.
Investor unease is reflected in the FTSE 100 Volatility index <.VFTSE>, which has leapt more than 50 percent since April 3 on concerns about global growth and Europe's debt crisis.
People are looking out for short term gains for the moment, said Dean Stevens a trader at Galvan.
Banking stocks <.FTNMX8350>, one of the largest components of the FTSE index, rebounded on Wednesday after HSBC raised its call on the sector to overweight for the first time in four years, citing valuation grounds.
This pushed up the FTSE, with Barclays
The cyclical mining sector also propped up the index, with silver producer Fresnillo
Investors came rushing back in on the dips with the sector up 1.7 percent having shed 10.3 percent over the past month as worries over China growth have crimped the outlook for sector earnings.
I am quite sceptical on China in the long term. There's clearly been an asset bubble but in the short term it's unlikely that Chinese growth will greatly disappoint and they've got scope for fiscal stimulus, Ewen Stewart, UK strategist at Investec said.
Miners drew some support from better than expected first-quarter numbers overnight from Alcoa
Investors will watch March's Federal Budget and the latest Federal Reserve Beige Book, both to be published after the London close at 1800 GMT, following weaker than expected payrolls on Friday, which precipitated the sell-off on Tuesday.
On the downside, BSkyB
The bank said it is cutting its earnings forecasts for BSkyB given a less favourable subscriber mix and gross margin erosion (which) more than offset(s) the benefit of the lower broadband wholesale fees recently announced by Ofcom.
We remain positive on a longer-term view, (but) regulatory drags in Openreach from April may contribute to ‘12/13 revenue guidance being reduced at the FY results on 10 May, while hopes for a dividend hike may be disappointed, JPMorgan said.
(Additional reporting by David Brett; Editing by Ron Askew)