FTSE led up by financials 

The top share index rose 0.3 percent in early trade on Wednesday, led by financials which rallied on hopes a solution to euro zone debt worries could be imminent. Skip related content

By 9:07 a.m., the FTSE 100 was up 16.74 points at 5,128.58, having finished 0.4 percent higher on Tuesday.

European governments have agreed in principle to help Greece, German coalition sources told Reuters on Tuesday. A German government spokesman later dampened hopes by saying a decision had not yet been reached.

European Union leaders will hold a special summit on the economy on Thursday.

Banks and life insurers, which have been hit hardest as investors have speculated on potential exposure to the eurozone debt issue, were among the blue-chip leaders.

Europe's biggest bank HSBC added 1.4 percent, while Barclays , Lloyds Banking Group and Standard Chartered were 2.1-4.3 percent higher.

Insurers Aviva , Resolution and Legal & General gained 0.2-4.2 percent.

"Some of the worry that Greece would be left on its own has gone out of the market," said David Morrison, market strategist at GFT Global. "But I think investors need to be wary. We are responding to rumour and we are not entirely sure how these talks are going to pan out," he said.

The FTSE rally echoed moves in the United States and Asia overnight, which rose on the Greek rescue plan reports.

Utility companies were also on the front foot, led higher by Centrica , which rose 2.4 percent as Morgan Stanley raised its recommendation and upped its target price.

The broker also raised its target price for National Grid , which gained 0.5 percent, while Severn Trent and United Utilities up 0.2 percent and 0.5 percent respectively.

RECKITT RISES

Consumer goods group Reckitt Benckiser climbed 2.3 percent after saying it expected good growth in 2010, as it posted in-line fourth-quarter results.

The world's largest interdealer broker ICAP extended its recent rally following heavy falls after a profit warning on Friday, rising 3.8 percent and helped by a Goldman Sachs upgrade.

On the economic front, investors were awaiting an announcement from the Bank of England, due at 10:30 a.m., which was widely expected to see the central bank revise down its 2010 growth forecasts and revise up its near-term inflation profile.

Governor Mervyn King was also expected to shed light on the Monetary Policy Committee's decision last Thursday to pause its 200 billion pound quantitative easing program.

Before that, at 9:30 a.m., data for British manufacturing output was expected to show a pick-up in December, after a disappointing flat reading in November.

The broader measure of industrial output was also expected to have risen modestly, buoyed by energy use stemming from the unusually cold weather.

The mining sector, which shed over 8 percent last week, was mixed following results from BHP Billiton .

BHP Billiton fell 0.7 percent after the miner signalled caution over a sustained global recovery and held off from a share buyback after reporting its weakest first-half profit in four years.

Rio Tinto , which reports results on Thursday, fell 0.3 percent, but Fresnillo , Xstrata , Antofagasta and Anglo American rose 0.1-1.3 percent.

Among fallers, software company Autonomy fell 5.4 percent after launching a 500 million pound convertible bond offering to fund acquisitions and pay down debt.

(Editing by Dan Lalor)