The top share index edged higher early on Wednesday, bouncing back from sharp falls in the previous session, boosted by hopes of further quantitative easing in the U.S. and bullish updates from UK corporates.
Retailer Next jumped 5.5 percent, precious metal miner Randgold rose 3.9 percent and satellite provider Inmarsat gained 2.4 percent after all three firms reported upbeat third-quarter trading updates.
London's blue chip index <.FTSE> gained 21.64 points, or 0.4 percent to 5,443.21 by 8:52 a.m., having fallen 2.2 percent on Tuesday after Greece shocked markets by offering a referendum to voters on the recently agreed EU bailout package.
Stocks rose in tandem with U.S. stock index futures ahead of Federal Reserve press conference later on Wednesday.
Traders said investors were hopeful the Fed, which began a two-day policy meeting on Tuesday, could begin to prepare financial markets for further monetary easing, even if it refrains from any new stimulus just yet.
The market is expecting further stimulus will come from the US. The fact that they are discussing it is why the market is better but it has the potential to be sold off quite easily, Martin Dobson, head of trading at Westhouse Securities, said.
A Greece default is not showing in the market and they're really on a knife edge. I'm surprised the market is up. Any gain will be short-lived.
Miners <.FTNMX1770> added most points to the index, rallying in tandem with base metal prices on hope any positive moves by the Fed to ignite growth will drive fresh demand in the sector.
West Africa-focussed miner Randgold Resources was a strong performer after it posted a jump in third-quarter profit, helped by an 80 percent surge in gold production and higher metal prices.
Also boosted by a bullish statement was fashion retailer Next , which shrugged off gloom shrouding the UK economy to keep its full-year profit forecast.
Seymour Pierce said the update was better than most had feared and Next's valuation does not reflect its future growth potential and cash generation, repeating its buy rating on the firm.
Elsewhere, Inmarsat gained after the satellite services provider posts better-then-expected third-quarter results, helped by its LightSquared spectrum sharing deal.
ARM rose 4.1 percent after Hewlett Packard Co unveiled plans to develop extremely low-energy servers, partnering with companies such as chip designers ARM.
Banks <.FTNMX8350> were mixed, with Barclays up 2.1 percent and Royal Bank of Scotland rising 1.4 percent ahead of third-quarter trading update on Thursday.
Standard Chartered , however, fell 1.7 percent as Evolution Securities cut its recommendation on the firm to neutral from buy on valuation grounds after results.
The Asia-focussed bank reported its nine-month underlying profit grew at a double-digit rate and said it had no direct sovereign exposure to troubled euro zone nations, but a weak performance in India weighed on results.
And LLoyds Banking Group shed 4.1 percent after its chief executive was forced to take a temporary break from his duties due to ill health.
Having gained just over 8 percent in October, the UK's benchmark has fallen 5.1 percent in the previous three trading days as doubts began to surface over the details of the euro zone debt plan.
UBS said weak volumes and little institutional participation raised questions over the sustainability of the recent rally.
Hedge funds have turned net buyers in three of the past four weeks, but long-only investors appear to be selling into the rally. Even during the rally in October, market volumes have been low.
UBS said investors have turned net sellers of the healthcare sector and turned net buyers of construction materials.
Worries over euro zone debt contagion remained after Greek Prime Minister George Papandreou's shock announcement on Tuesday that he intended to let Greeks vote on the 130 billion euro (111.7 billion pounds) bailout package.
Papandreou won the backing of his cabinet on Wednesday to hold the referendum but will find the stunned euro zone leaders who struck the deal last week harder to convince.
Papandreou's strategy could well be to smoke out the opposition by winning the confidence vote on Friday, and then try and gain approval for the austerity plan by presenting it as the best of the two unpalatable options, David Miller, Partner at Cheviot Asset Management, which has 3.5 billion pounds of assets under management.
This crisis has always been more about the politics than the economics. We have now reached the point when the time for talk is over, and coordinated decisions to restore confidence in the euro zone have to be made.
Ex-dividend factors knocked a hefty 12.83 points off the FTSE 100 index on Wednesday, with BP , Royal Dutch Shell , GlaxoSmithKLine , Intertek Group , ITV , and Ashmore Group all losing their dividend attractions.
(Additional reporting by Francesco Canepa; Editing by Hans-Juergen Peters)