Strong quarterly updates from BP and BG Group helped Britain's top share index to hit a 2-1/2-month high on Tuesday as investors detected some reason for hope in earnings statements released so far this reporting season.

The mood countered some wariness Wednesday's European Union summit will provide a decisive plan to end the debt crisis.

Oil major BP advanced 4.1 percent after it predicted production growth and an almost 50 percent increase in planned divestments to $45 billion, turning the corner in its recovery from the Gulf of Mexico oil spill last year.

BG Group beat expectations of its third-quarter earnings and raised its profit full-year profit guidance for its LNG business . BG shares rose 3.5 percent.

Royal Dutch Shell , which will report quarterly results on Thursday, was up 0.4 percent.

“Companies are not really reporting any particular weakness in demand. This results season is going to be ended up ok,” said Gareth Evans, equity strategist at Deutsche Bank.

“The earnings numbers so far and the sort of newsflow coming out of the companies are definitely not giving us cause for concerns,” he said, adding that some improvement in US and Chinese economic data also lifted the outlook for corporates.

By 10:24 SA time, the FTSE 100 was up 5.8 points, or 0.1 percent, at 5,553.86 after gaining 3 percent in the previous two sessions.

The FTSE 100 volatility index eased to 27.1 percent, though it remained elevated from below 20 percent at the end of July. The higher the volatility index, the lower the risk appetite.

Any concrete plan being announced on Wednesday to deal with the two-year-old sovereign debt crisis would likely see volatility easing further.

However, European politicians and financial institutions have yet to agree on how much more banks would have to take on their Greek debt holdings than previously agreed.

“It sounds like (euro zone politicians) have put in a sensible proposal together, and as long as you see it voted through, the market will hold in,” a London-based trader said.

He did not expect any rally to go more than 300 points as the market had already priced in some of the positive news, but if the deal did not get pass by lawmakers, he expected the FTSE to drop by about 10 percent.

He said investors should stay “neutral” at the moment. “Opportunities will present themselves if you can be patient and sit on your hands for a couple of days,” he said.

Adding to the uncertainty, German lawmakers secured a full parliamentary vote on crisis measures negotiated by Chancellor Angela Merkel and her peers, a move which could risky delaying the region's response to the problems, while government sources said an Italian cabinet meeting to discuss fresh pension reforms on Monday ended with no decision.

Italy has been pressed for swift economic reforms by its European Union partners for fears that the country could be dragged into the two-year-old debt crisis, though the response has been slow.

UK banks slipped 0.4 percent after rising 2.5 percent on Monday, while euro zone banks dipped 0.1 percent.

British banks, which are seen more defensive versus its euro zone peer, have fallen 24 percent this year, faring better than a 34 percent decline in euro zone banks.

ICAP topped the FTSE 100 fallers' list on Tuesday, down 2.6 percent after UBS cut its rating to “sell” and earnings forecasts. - Reuters