By Kit Rees
LONDON (Reuters) - Britain's top share index rebounded from its lowest level in more than a year on Tuesday as risk assets breathed a sigh of relief on signs that a global trade war could be averted.
The blue-chip FTSE 100 (FTSE) closed 1.5 percent up at 6,994.85 points, with almost every constituent in positive territory. Mid-cap (FTMC) shares rose by a shade more than 1 percent.
A stronger dollar also helped to buoy the index. A weak pound typically supports the FTSE by giving an accounting boost to UK blue-chips companies that have revenue in dollars.
Risk assets came under pressure last week on the back of worries over escalating global trade tensions after the United States planned tariffs on up to $60 billion of Chinese goods, with exposed sectors such as basic resources hit hardest.
However, hopes that tensions could ease were sparked by reports that Chinese and U.S. officials were in negotiations to avert a full-blown trade war.
"Suddenly the whole show is looking a lot like a negotiating tool rather than any serious intention to imitate a trade war," said Fiona Cincotta, senior market analyst at City Index.
The FTSE 100 has been trading at its lowest levels since December 2016, posting losses for the past four sessions. So far the FTSE is down about 9 percent in 2018.
"It comes back to more stock-picking, because last year it was difficult to lose out as long as you were holding on to something," said Mike van Dulken, head of research at Accendo Markets.
Heating and plumbing products supplier Ferguson (L:FERG) posted the best performance, up 6.7 percent after it reported a rise in first-half profit and proposed a special dividend and share consolidation of about $1 billion.
GlaxoSmithKline (L:GSK) rose 4.8 percent after the pharmaceuticals group agreed to buy Novartis's (S:NOVN) stake in their consumer healthcare joint venture for $13 billion.