Stocks swung sharply into positive territory on Wednesday afternoon with the FTSE 100 hitting a four-week high on that US leaders can come to a deal to raise the debt ceiling before tomorrow's deadline.
Despite a weak start, the FTSE 100 finished up 22.48 points at 6,571.59, its highest level since September 20th when it closed at 5,696.43.
Markets surged in afternoon trade after reports that House Speaker John Boehner has agreed to take up a Senate plan which involves reopening the government until January and lifting the borrowing limit until February.
Speaking to Bloomberg, Senior House Republican Kevin Brady said that Boehner will allow the proposal to go to the House floor for a vote "in a very timely way". If in favour, the Senate could pass the bill to President Barack Obama before the end of the day.
Senior Market Analyst Michael Hewson from CMC Markets said the deal remains increasingly "at risk of an overshoot, with only a matter of hours to go, until we step over the red line of October 17th".
Fitch put further pressure on lawmakers last night after placing its prized 'AAA' credit rating for the US on 'negative watch'. The ratings agency said that prolonged negotiations have "cast[ed] doubt over the full faith and credit of the US".
Closer to home, data from the Office for National Statistics this morning showed that UK jobless claims fell by the most in 16 years in September, while the unemployment rate was unchanged at 7.7% in the three months to August.
Hargreaves Lansdown and IMI provide a lift
Financial services firm Hargreaves Lansdown was extending gains after yesterday reporting record levels of assets under administration in the fiscal first quarter.
Engineering group IMI pleased investors with the $1.1bn disposal of its Beverage Dispense and Merchandising divisions and a proposed cash return of £620m. The company also said that third-quarter results were in line with expectations with revenue 3% ahead of last year.
Shares in wireless testing group Anite collapsed by more than a third after the company warned sales and profits were being held back due to slower mobile handset testing activity. The unit would only breakeven in the first half, it said.
Telecoms giant BT was higher after Goldman Sachs upgraded the stock to 'conviction buy'. Serco and Kentz Corp also advanced after both stocks were lifted by HSBC to 'overweight'.
Luxury brand Burberry declined for a second straight day after the surprise exit of long-running chief Angela Ahrendts. Current Chief Creative Officer Christopher Bailey is to be her successor, though some analysts raised concerns about his level of experience.
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 1,090.00p +4.81%
IMI (IMI) 1,528.00p +1.93%
Standard Chartered (STAN) 1,499.50p +1.90%
Aviva (AV.) 435.40p +1.68%
ITV (ITV) 190.10p +1.66%
Associated British Foods (ABF) 1,995.00p +1.53%
Imperial Tobacco Group (IMT) 2,220.00p +1.42%
Tullow Oil (TLW) 1,001.00p +1.42%
Barclays (BARC) 283.65p +1.36%
Vodafone Group (VOD) 225.00p +1.35%
FTSE 100 - Fallers
Schroders (SDR) 2,568.00p -2.80%
Fresnillo (FRES) 937.50p -1.63%
Glencore Xstrata (GLEN) 331.20p -1.43%
SSE (SSE) 1,423.00p -1.39%
Reckitt Benckiser Group (RB.) 4,309.00p -1.26%
Croda International (CRDA) 2,505.00p -1.22%
Rolls-Royce Holdings (RR.) 1,102.00p -1.17%
Rexam (REX) 481.00p -1.07%
William Hill (WMH) 419.70p -0.94%
Weir Group (WEIR) 2,338.00p -0.81%
FTSE 250 - Risers
Senior (SNR) 278.30p +5.06%
Mitie Group (MTO) 312.90p +4.65%
Micro Focus International (MCRO) 798.00p +3.91%
Kentz Corporation Ltd. (KENZ) 535.00p +3.48%
Savills (SVS) 642.00p +3.38%
F&C Asset Management (FCAM) 101.40p +3.21%
Balfour Beatty (BBY) 283.40p +3.05%
Pace (PIC) 294.00p +2.94%
Cable & Wireless Communications (CWC) 42.16p +2.85%
Synthomer (SYNT) 249.00p +2.85%
FTSE 250 - Fallers
Kenmare Resources (KMR) 23.00p -6.69%
Homeserve (HSV) 229.60p -5.36%
Polymetal International (POLY) 525.00p -4.28%
Carpetright (CPR) 620.00p -4.25%
Rank Group (RNK) 154.00p -3.14%
Kazakhmys (KAZ) 260.60p -2.80%
Bwin.party Digital Entertainment (BPTY) 116.60p -2.59%
Provident Financial (PFG) 1,615.00p -2.48%
Spirent Communications (SPT) 124.30p -2.28%
Ted Baker (TED) 1,669.00p -2.23%