By Kit Rees and Sudip Kar-Gupta
LONDON (Reuters) - Britain's top equity index rose on Wednesday to stage a modest recovery from a slump in the previous session, as firmer oil prices enabled heavyweight energy stocks to bounce higher.
The blue-chip FTSE 100 index, which had fallen 2.8 percent in the previous session, rose 1.9 percent to 6,050.11 points an hour before the session's close.
Oil prices stabilized on Wednesday as falling U.S. inventories offset the impact of weak economic data from China, and this in turn propped up the shares of heavyweight energy groups such as BP (LONDON:BP) and Royal Dutch Shell (LONDON:RDSa).
"There's a bit of support coming through the oil price, which is acting as a trigger for the FTSE to reclaim some ground," said Hantec Markets' analyst Richard Perry.
Airline IAG (LONDON:ICAG) rose 5 percent, leading the index higher together with easyjet, up 3.3 percent. A bullish note from Morgan Stanley (NYSE:MS) lifted its forecasts for IAG, saying that the company was its top pick in the sector.
Brenda Kelly, head analyst at London Capital Group, said that IAG looks set to be one of the main beneficiaries on the back of fewer fuel hedging costs.
The FTSE 100 raced to a record high of 7,122.74 points in late April but has since fallen back, hit by concerns over an economic slowdown in China and the prospect of an interest rate rise soon in the United States.
Higher interest rates typically hurt stocks as they boost the appeal of bonds and cash by increasing returns on those assets, while the China slowdown has impacted oil and metals prices since China is a major global commodities consumer.
There were more signs of economic weakness in China on Wednesday after data showed that activity in China's factory sector unexpectedly shrank to a 6-1/2 year low in September.
"Given the amount of bearishness ... particularly in respect to China, some of it has been vindicated to some extent today owing to the weak manufacturing number, but I do feel in some respects that was very much priced in to the market and there was a case of buying back in on the news," London Capital Group's Kelly said.
The FTSE 100 is down by nearly 10 percent since the start of 2015.
Securequity sales trader Jawaid Afsar said he would look to sell out on rallies on the FTSE, given the backdrop of the China slowdown, and Afsar added that the FTSE was still vulnerable of falling down to last month's low level of 5,768 points.