Sharecast - The FTSE 100 was up 0.3% at 7,790.52.
US President Joe Biden and Republican leader Kevin McCarthy failed to reach an agreement on the debt ceiling on Monday, but insisted that talks had been "productive". McCarthy said a deal can be done, while Biden said a default was "off the table".
Russ Mould, investment director at AJ Bell, said: "Experience tells investors that these stand-offs always end with a last-minute deal so the market is mostly taking this saga in its stride, particularly given commentary from both sides seems to be increasingly conciliatory.
"Just how close Washington must push for there to be a genuine fear of default is an open question, but right up to the eleventh hour, or in other words the end of this month, the expectation is likely to remain that a deal will be done."
On home shores, a survey showed that private sector growth slowed in May.
The flash S&P Global/CIPS composite purchasing managers’ index - which measures activity in the manufacturing and services sectors - fell to 53.9 from 54.9 in April, falling short of expectations for a reading of 54.7.
A reading above 50.0 indicates expansion, while a reading below signals contraction.
The services PMI business activity index declined to 55.1 from 55.9, coming in below consensus expectations of 55.3.
Meanwhile, the manufacturing PMI fell to 46.9 in May from 47.8, below consensus expectations for a reading of 48.0.
The survey found that economic growth remained centred on the service sector, with travel, leisure and hospitality businesses widely commenting on resilient consumer demand. However, manufacturing firms indicated the steepest reduction in production levels for four months.
Spending is being diverted away from goods to services, and many companies are winding down their inventories, exacerbating the downturn in demand and driving output and prices lower.
"The UK is therefore seeing a tale of two economies, with the divergence between manufacturing and services posing difficulties for policymakers," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
"However, it's the far larger service sector that will typically dictate policy, meaning these survey results are nothing but hawkish in suggesting the Bank of England has more work to do to quash stubbornly high inflationary pressures in the services economy."
Earlier, figures from the Office for National Statistics showed that the government borrowed more than expected last month as energy support schemes, benefit payments and higher debt interest payments pushed up spending.
Net borrowing for April came in at £25.6bn, well above expectations of £19.1bn and up from April’s £13.7bn.
It was also above the Office for Budget Responsibility’s forecast of £22.4bn and marked the second-highest April borrowing figure since monthly records began in 1993.
In equity markets, British Land and Land Securities were the standout gainers on the FTSE 100.
SSP rallied after the Upper Crust owner said FY 2023 sales and core profit were set to be at the upper end of its expectations, as it hailed a strong first half performance, particularly in North America. The company had guided to sales of £2.9bn to £3bn and earnings before interest, tax, depreciation and amortisation of £250m to £280m.
Elsewhere, meat producer Cranswick (LON:CWK) gained as it reported a rise in full-year profit and revenue.
On the downside, RS Group - formerly known as Electrocomponents (LON:RS1R) - was under the cosh after full-year results, as it said trading over the first seven weeks of 2023/24 reflected "a slowing" in industrial growth, and pointed to continued weakness and aggressive competition in electronics.
Pennon lost ground after Ofwat said it has launched an enforcement investigation into South West Water’s leakage performance data.
BT Group (LON:BT) was in focus after Altice upped its stake in the telecommunications firm to 24.5% but insisted it does not plan to make a takeover offer.
Market Movers
FTSE 100 (UKX) 7,790.52 0.25%
FTSE 250 (MCX) 19,304.57 0.16%
techMARK (TASX) 4,711.57 -0.12%
FTSE 100 - Risers
British Land Company (BLND) 366.10p 2.72%
Land Securities Group (LAND (LON:LAND)) 647.40p 2.53%
British American Tobacco (LON:BATS) 2,722.50p 1.64%
Unite Group (LON:UTG) 928.50p 1.53%
Mondi (LON:MNDI) 1,309.00p 1.47%
SEGRO (SGRO) 827.00p 1.47%
Smurfit Kappa Group (CDI) (SKG) 3,038.00p 1.47%
National Grid (LON:NG.) 1,121.00p 1.45%
Hargreaves Lansdown (LON:HRGV) (HL.) 828.40p 1.42%
Barclays (LON:BARC) 162.26p 1.36%
FTSE 100 - Fallers
RS Group (RS1) 806.00p -5.49%
B&M European Value Retail S.A. (DI) (BME) 464.80p -5.14%
JD Sports Fashion (JD.) 155.35p -3.15%
Frasers Group (FRAS) 725.00p -3.14%
Burberry Group (LON:BRBY) 2,280.00p -2.19%
BAE Systems (LON:BAES) (BA.) 972.20p -1.60%
Next (NXT) 6,556.00p -1.27%
Convatec Group (LON:CTEC)) 219.60p -1.17%
Ashtead Group (LON:AHT) 4,939.00p -1.14%
Halma (LON:HLMA) 2,427.00p -1.14%
FTSE 250 - Risers
PureTech Health (PRTC) 222.00p 5.21%
ASOS (LON:ASOS) (ASC) 460.90p 3.92%
Cranswick (CWK) 3,262.00p 3.89%
Great Portland Estates (GPE) 516.50p 3.76%
SSP Group (SSPG) 273.00p 3.33%
Drax Group (LON:DRX) 638.80p 2.77%
Tritax Big Box Reit (BBOX) 147.40p 2.72%
TR Property Inv Trust (TRY) 291.50p 2.64%
Premier Foods (PFD) 132.00p 2.48%
Harbour Energy (LON:HBR) 243.70p 2.44%
FTSE 250 - Fallers
Computacenter (LON:CCC) 2,382.00p -2.85%
Auction Technology Group (ATG) 728.00p -2.54%
Pets at Home Group (PETS) 369.80p -2.53%
Future (FUTR (LON:FUTR)) 852.00p -2.24%
Pennon Group (LON:PNN) 804.00p -2.19%
Assura (AGR) 50.50p -1.75%
ICG Enterprise Trust (ICGT) 1,132.00p -1.57%
Vistry Group (LON:VTYV) (VTY) 800.50p -1.54%
Molten Ventures (GROW) 283.20p -1.46%
Foresight Solar Fund Limited (FSFL) 108.40p -1.28%