Markets bounce back ahead of Fed statement

Britain's top share index bounced back above the 5,000 level and US markets opened higher as investors hoped for some soothing words from the US Federal Reserve on the global debt and growth problems.

Wall Street has gained ground since opening, with major indices climbing more than two per cent ahead of the Fed's policy statement due out at 1915 GMT, on grounds it may propose relaunching its fiscal stimulus programme.

However, some analysts expect the Federal Reserve not to make major changes in policy at its meeting.

"The recent hysterical behaviour in the markets is by no means fully explained by economical factors and only shows the crisis of confidence to politicians, banks and agencies," said Anita Paluch, sales trader at ETX Capital in London.

"Reassuring words of Barack Obama didn't help much; all eyes are now on FOMC meeting and any signals of QE3."

The FTSE 100 remained down, shedding 31.70 points or 0.6 per cent around lunchtime – led by banks and integrated oils.

"We're probably looking a little bit further on the downside although we are looking oversold on momentum," Phil Roberts, chief European technical strategist at Barclays Capital, said.

Roberts said key technical levels to watch out for were the 2010 low at 4,783 in the near term and below that around the 4,600 level back to 2009, when hopefully the selling will be exhausted.

London's blue chip index has lost 15.5 per cent of its value in the last eight trading sessions, leaving the FTSE oversold according to its relative strength index.