FTSE 100 off three-month lows on movement in US debt talks
* FTSE 100 gains 1 percent
* Stocks bounce on hopes of short term hike to debt ceiling
* FTSE 100 still seen as technically weak
* GKN benefits from target price hike, directoral change (Updates prices, adds quote, detail)
By Alistair Smout
LONDON, Oct 10 (Reuters) - Britain's top share index bounced off three-month lows early on Thursday as signs of progress on ending the fiscal stalemate in Washington buoyed sentiment, with industrial firm GKN among the top risers.
Equities in Europe mirrored a rebound overnight on Wall Street, which traders attributed to reports that U.S. Republicans were looking to a short-term increase to the government's borrowing authority to buy time for talks on broader policy issues.
The UK's FTSE 100 was up 61.79 points, or 1 percent, at 6,399.70 by 1025 GMT, with 90 percent of stocks in positive territory.
The index had fallen over the three previous days to its lowest level since July 3 on worries the U.S. could default on its debt, and traders were wary about reading too much into today's rise given the recent poor performance of the index.
"I think predominantly it's a dead-cat bounce. We haven't really taken part in any rallies that have taken place, and we only broke 6,400 briefly, so we're hardly in a strong position," Nick Dale-Lace, sales trader at CMC Markets, said.
"The news last night that we may be getting closer to a deal is the reason for it, but if you look into the nitty gritty, it's still a dire situation, where the best we're going to get is a kicking of the can further down the road."
While the Relative Strength Index (RSI) fell deep into "oversold" territory - indicating the potential for a broader recovery in the market - the morning's rebound was not enough to break a downtrend from September's high of 6,660
"The FTSE 100 may bounce from here given its oversold nature but may struggle to make any real headway. The downside is the least path of resistance with the 200-day moving average (6,416) acting as a ceiling," Jawaid Afsar, sales trader at SecurEquity, said.
While volatility - a crude gauge of investor fear - fell 7.5 percent early on, Afsar predicted that it would rise again as the October 17 deadline for getting a debt deal done drew closer.
Among top gainers was GKN, which rose 3.2 percent after RBC raised its target price on the stock, with the news that Informa's current finance director Adam Walker, who traders said was well respected in the City, is joining next year also supporting the share price. (Additional reporting by David Brett; editing by Patrick Graham)
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