Royal Mail rallies on debut, FTSE 100 up on U.S. debt hopes
* Postal service jumps 33 pct in conditional trading
* FTSE 100 up 0.7 percent
* Implied volatility retreats sharply from 5-wk highs
By Toni Vorobyova
LONDON, Oct 11 (Reuters) - British equities rose on Friday, with market attention focused on the debut of Royal Mail , up 33 percent from its issue price after one of the country's biggest privatisations in decades.
After a heavily oversubscribed sale, shares in the former postal monopoly changed hands at 450 pence in conditional trading ahead of their addition to indices on Oct 15.
Demand was fuelled by investors who did not get as many shares as they had wanted in the initial float.
That prompted charges by the government's political opponents that the company had been sold too cheaply, but dealers said the move might yet prove relatively short-lived once players take a closer look at the prospects of a heavily unionised company in a competitive market.
"Looking at the share price it definitely had a storming IPO," said Jonathan Roy, broker at London Stone Securities.
"People are trying to get a serious holding but that's only a short term trend and I think people are going to step back in the next couple of weeks and take a harder look at the business."
If the Royal Mail shares manage to hold on to the gains, that could win them a place in the blue-chip FTSE 100 rather than the mid-cap FTSE 250 at the next index reshuffle.
The main driver for the market as a whole remained events in the United States, with investors cheering signs that politicians appeared ready to end the deadlock after meeting at the White House.
"The Royal Mail is a bit of a sideshow to the wrangling in America. They have sat down and had some talks, which markets have met with optimism. But if things turn sour over the weekend this optimism could quickly disappear," Roy said.
The FTSE 100 was up 45.88 points, or 0.7 percent, at 6,476.37 points by 1021 GMT, having jumped 1.5 percent on Thursday - its biggest one-day percentage gain since July.
The receding U.S. concerns have seen the FTSE volatility index, a crude gauge of investor fear, fall 20 percent from five-week highs hit on Wednesday. The index was down 7.9 percent on Friday.
Investors are keen to see a deal before the Oct. 17 deadline to raise the U.S. debt ceiling. However, markets are likely to remain jittery unless the deal - needed to avoid a sovereign default in coming weeks - offers a long-term solution.
"Volumes will continue to be light though going into the weekend and gains will be limited as the proposals for the U.S. debt ceiling are still far from a perfect solution," Sanlam Securities' head of trading, Mark Ward, said. (Additional reporting by Tricia Wright; editing by Patrick Graham)