Britain's blue-chip index rebounded on Tuesday with other bourses after a Europe-wide sell-off in markets in the previous session, while broker comment drove the top risers and fallers.
The FTSE 100 index <.FTSE> was up 0.3 percent by 11.25 a.m. British time after shedding 1.9 percent on Monday, when poor manufacturing data coupled with political uncertainty in France and the Netherlands spooked investors.
Other European equity markets also bounced back as investors looked ahead to a two-day meeting of the U.S. Federal Reserve's rate-setting Federal Open Market Committee (FOMC) and the release on Wednesday of UK GDP figures.
Things were a little bit overdone yesterday ... we have had a decent bounce this morning, said David Morrison, derivatives market strategist at GFT. I think if we can hold above around 5,775 the market could recover further, but we have to bear in mind we have UK GDP results tomorrow and an FOMC meeting.
The FOMC will make its post-meeting announcement at 1630 GMT on Wednesday. Analysts expect the U.S. central bank to stick to its message that official borrowing costs should stay near zero until at least late 2014, with markets looking for any suggestions of an eventual third round of quantitative easing.
It is going to be a tricky one on the FOMC. I think the market has priced some kind of move towards an extension of Operation Twist, which I don't think will happen at this meeting so the market might be disappointed, but I think the next meeting in June is where we will get more QE, Morrison said.
The Fed's Operation Twist stimulus programme, under which it sells short-term securities and buys longer-dated ones to push down long-term yields, is due to end in June.
Banks <.FTNMX8350> rallied after being hit hard by euro zone debt exposure worries on Monday, with Barclays
I am surprised we are as strong as we are today. There may be expectations that earnings are going to be better in Europe than expected, and there is an anticipation the FOMC will announce further QE, and that the BOJ will do so on Friday, said Neil Marsh, strategist at New Edge.
Miners <.FTNMX1770> and integrated oils <.FTNMX0530> also bounced higher, supported by steadier commodity prices.
Broker comment boosted shares in International Airlines Group
Meanwhile, shares in UK life insurers were among the top FTSE 100 <.FTSE> gainers, led by Aviva
Disappointing bed sales and a deterioration in trading in continental Europe led Britain's biggest floor coverings retailer Carpetright
(Editing by Catherine Evans)