London - Britain's top share index bounced off three-month lows early on Thursday as signs of progress on ending the fiscal stalemate in Washington buoyed sentiment, with utility SSE leading gainers after announcing hefty price hikes.
The UK's FTSE 100 was up 30.11 points, or 0.5 percent, at 6,368.02 by 09:34 SA time, having fallen over the three previous days to its lowest level since July 3 on worries the US could default on its debt.
Equities in Europe mirrored a rebound overnight on Wall Street, which traders attributed to reports that US Republicans were looking to a short-term hike in the government's borrowing authority to buy time for talks on broader policy issues.
Volatility - a crude gauge of investor fear - fell 7.5 percent early on, but longer-term worries persisted.
“The FTSE 100 may bounce from here given its oversold nature but may struggle to make any real headway. The downside is the least path of resistance with the 200-day moving average (6,416) acting as a ceiling,” Jawaid Afsar, sales trader at SecurEquity, said.
“Markets are likely to remain nervous with increasing volatility as the October 17 (US debt ceiling) deadline approaches.”
The annual IMF and World Bank meetings kept the global focus very much on Washington, while in the UK investors looked to a Bank of England monetary policy announcement due at 13:00 SA time.
The BoE seems unlikely to make waves in the market, with interest rates expected to stay anchored at 0.5 percent and quantitative easing unchanged.
Energy suppliers were among the top gainers after SSE said it would raise prices by an average 8.2 percent next month.
That will potentially boost profits but also trigger what is likely to be a political backlash against UK energy groups over rising household fuel bills.
SSE was up 1.3 percent while Peer Centrica gained 1.6 percent.
British defence contractor BAE Systems eked out 0.6 percent gains after it maintained its outlook but said its earnings could be hit by 6-7 pence per share should it fail to reach agreement on a jet deal with Saudi Arabia this year. - Reuters