LONDON'S top flight saw its gains limited as the US Federal Reserve warned it could slow the pace of future US interest rate rises.
The FTSE 100 Index had bounced back throughout the day, led by a resurgence in banking stocks following a recent bout of torrid trading in European markets.
The FTSE 100 Index was up 40.1 to 5672.3, while Germany's Dax grew 1.6 per cent and France's Cac 40 rose to 1.9 per cent.
The wider market gains came after the FTSE 100 sunk to its lowest close for more than three years on Tuesday.
US Fed chairwoman Janet Yellen put a slight dampener on rising UK stocks yesterday, warning that "financial conditions in the United States had become less supportive of growth".
The markets had rallied throughout the day, as banking stocks fought back after sharp falls in previous sessions caused by fears that another financial crisis could be around the corner.
Investors were concerned as to whether the banking sector could absorb the impact of slower global growth.
London-listed banks made gains, with Barclays rising 1.7 per cent or 2.75p to 159p, Standard Chartered was up one per cent or 4.10p to 407.4p, while Lloyds Banking Group grew 0.4 per cent or 0.27p to 58.4p.
It came as German banking giant Deutsche Bank, which saw shares fall to a 30-year low on Tuesday, surged as much as 17 per cent throughout the day on cheer over reports it is looking to boost its balance sheet strength.
The group is said to be considering launching an emergency bond buyback, just a day after its boss assured its balance sheet was ''rock solid''.
Sentiment was also buoyed by an increase in the oil price, which edged 71 cents higher to just over US$31 US a barrel.
The pound was marginally up against the dollar at 1.44, as markets digested the comments by Ms Yellen.
The pound was also slightly up on the euro at 1.28.
In stocks, model rail firm Hornby saw its stock market value fall more than 40 per cent after it warned over mounting losses following ''disappointing'' new year trading.
The group now expects to post ''substantially'' wider underlying pre-tax losses for the full year, at between £5.5 million to £6 million, and revealed a £1 million write-off after reviewing its stock and balance sheet.
Shares plunged 42 per cent or 34.1p to 46.8p.
Pub group Greene King saw its stock value rise as record sales on Christmas Day helped it notch up strong trading over the festive period.
The Bury St Edmunds-based firm said it made revenues of £6.8m on Christmas Day, driven by food sales, with overall like-for-like sales lifting by 5 per cent over its two-week festive period.
Its shares grew 2.7 per cent or 22.5p to 857p.
Meanwhile, Arm Holdings, which makes chips for US technology giant Apple, saw its stock value come under pressure as investors remained worried about the global outlook.
It came despite the Cambridge-based business posting a 31 per cent rise in pre-tax profits to £414.8m last year as sales increased by 15 per cent to US$1.49 billion (£1.1bn).
Shares were down 4.3 per cent or 41p to 899p.
The biggest risers in the FTSE 100 Index were Worldpay Group up 5.8 per cent or 15.3p to 279.1p, IAG up 4.8 per cent or 23.4p to 507p, Mondi up 4.7 per cent or 54p to 1197p and Prudential up 4.3 per cent or 49.5p to 1175.5p
The biggest fallers in the FTSE 100 Index were Arm Holdings down 4.3 per cent or 41p to 899p, Rangold Resources down 3.4 per cent or 205p to 5700p, Ashtead Group down 3.2 per cent or 26.5p to 798.5p and Antofagasta down 3 per cent or 12.5p to 398.4p.
