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LONDON (Alliance News) - London stock indices trade higher mid-morning Wednesday, rebounding from an end-of-quarter drop on Tuesday, as investor sentiment was lifted by better-than-expected manufacturing Purchasing Managers' Index readings in the UK and Europe.

London's blue chip index trades up 1.1% at 6,848.70, having fallen 1.7% on Tuesday. The FTSE 250 is up 0.6% at 17,189.77 and the AIM All-Share index up 0.2% at 717.32.

The British manufacturing sector expanded at the fastest pace in eight months during March on stronger growth in production and new orders that led to increased hiring, survey results from Markit Economics and the Chartered Institute of Procurement & Supply showed. The Markit/CIPS PMI rose to 54.4 from 54.0 in February, which was revised down from 54.1. The latest reading was in line with economists' expectations.

A PMI score above 50 indicates growth in manufacturing and the British factory sector expanded for the 24th consecutive month.

"The manufacturing sector has provided further evidence that the UK economy is in rude health as the index continued to show positive growth, with a glut of new orders and with production ramping up," says David Noble, group Chief Executive Officer at the Chartered Institute of Procurement & Supply.

"It was the consumer goods sector who was the star of the show, indicating that confidence amongst consumers is swelling and leading to optimism for the months ahead that activity will be maintained," Noble adds.

European stocks are also rebounding from Tuesday's losses, with the CAC 40 in Paris up 0.9% and the DAX 30 in Frankfurt up 0.7%, as manufacturing sectors in both countries and the eurozone as a whole beat expectations.

The French manufacturing sector continued to contract in March but at a slower pace than initially estimated, final data from Markit revealed. The PMI came in at 48.8 in March, up from 47.6 in February. The flash score was 48.2. In Germany, manufacturing growth in March was faster than estimated earlier, marking the strongest improvement in eleven months. The PMI figure climbed to 52.8 from 51.1 in February. The flash reading for the index was 52.4. Eurozone manufacturing PMI rose to a 10-month high of 52.2 in March from 51 in February. The flash score was 51.9.

The situation in Greece, however, continues to concern investors. According to a report by Reuters, Greece failed to reach a deal with the European Union and International Monetary Fund to unlock further financial aid on Tuesday, after the creditors dismissed the package of reforms tabled by Athens as ideas rather than a concrete plan.

The lack of a deal will raise the pressure on Greece's government, which is facing the prospect of running out of money in a few weeks though if fail to convince its creditors to give it more.

In the FTSE 100, Barclays, up 3.5%, Royal Bank of Scotland Group, up 2.5%, and Lloyds Banking Group, up 2.0%, were amongst the best-performing stocks, reversing all the losses they made on Tuesday.

Jefferies upgraded Lloyds to Hold from Underperform, saying the group's premium valuation is now supported by a progressively rising dividend.

In the FTSE 250, Evraz is the best performer, up 6.6%. The steel miner said it will return USD375 million to its shareholders even though its pretax loss widened in 2014 on the back of a USD1.0 billion foreign exchange loss caused by the devaluation of the rouble, saying it has "improved business prospects" in 2015.

FirstGroup, up 5.4%, is second best performer in the mid-cap index. The travel company said its trading in the fourth quarter and whole of the financial year that ended on Tuesday was in line with its expectations, with good performances in its UK bus and rail operations.

AIM-listed ASOS shares are up 8.9% after the online fashion retailer reported an increase in revenue for the first half of its financial year after a "record Christmas season", but a drop in profit as its gross margin took a hit from price investments it is having to make. The company reported a 10% drop in pretax profit for the six months to February 28 to GBP18 million from GBP20 million the year before, while revenue was up 14% to GBP550.5 million from GBP481.7 million.

Still ahead in the economic calendar there is US Markit and ISM manufacturing PMI at 1445 BST and 1500 BST respectively.

Futures indicate Wall Street will open lower, with the DJIA and Nasdaq 100 both pointed down 0.1%, and the S&P 500 down 0.2%.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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