Britain's FTSE 100 rallies on U.S. debt deal expectations

* FTSE 100 up 30.40 points at 6,579.51

* Equities rebound on talk of imminent debt deal in US

* Consumer stocks lag after weak updates from European peers

By David Brett

LONDON, Oct (KOSDAQ: 039200.KQ - news) 16 (Reuters) - Expectations of an imminent deal in Washington to avert a U.S. debt default sparked a sharp turnaround on Britain's top share index late on Wednesday.

London's blue chip index rallied off a session low of 6,504.27 to be up 30.40 points, or 0.5 percent at 6,579.51 by 1457 GMT, after a senior Senate Democrat aide said negotiations on legislation to raise the country's debt limit and reopen government agencies were nearing completion and a deal could be announced soon.

"The pressing issue was the debt payments and a potential U.S. default and that is what we seem to have averted here and that is the reason why the market has spiked," said Richard Hunter, head of equities at Hargreaves Lansdown (LSE: HL.L - news) .

Hunter said there is potential for short-term gain in equity markets at the expense of longer-term pain with politicians merely "kicking the can down the road", but at least if macro issues are dealt with, albeit temporarily, investors can focus on the corporate earnings season.

Consumer stocks such as Burberry and Reckitt Benckiser, however, lagged broader market gains after a handful of weak updates from major European producers.

Danone (Paris: FR0000120644 - news) , the world's largest yoghurt maker, cut its 2013 goals as problems in China hit third-quarter sales.

Also feeding in to the bearish sentiment were surprisingly poor sales from the world's biggest luxury goods maker, Louis Vuitton owner LVMH, and French advertising group Publicis (Paris: FR0000130577 - news) .

But British investment manager Hargreaves Lansdown rallied 4 percent as brokers began raising targets for the firm the day after it reported record assets under management.

Jeffries raised its target price on Hargreaves Lansdown 10 percent to 1,150 pence and repeated its "buy" rating.

IMI (LSE: IMI.L - news) climbed 2.3 percent to 1,533 pence, topping Britain's FTSE 100 index in brisk trade after the engineer announced the sale of its beverage dispensing and merchandising business for 690 million pounds ($1.1 billion).

"We see the disposal as a positive catalyst for the share price given the company strategy to move into higher margin areas... (and) see upside from these levels to trade at close to 17 pounds," Atif Latif, director at Guardian Stockbrokers, said

Heavyweight energy and financial stocks led the risers, contributing a combined 17 points to the index's gains.

Thin trading volumes, however, suggested many investors were awaiting confirmation of developments in Washington. Halfway through the month, the index has traded just over a third of the volume seen for the whole of September.

Technical analysts said the index's recent uptrend remained intact and rising lows since Oct. 10 are providing support.

Near-term support was seen at 6,525 and there was little resistance expected before 6,665 for any resulting relief rally if and when Washington finally delivers what the markets want, a technical analyst said. (Reporting by David Brett; Editing by Ruth Pitchford)