LONDON: FTSE Rallies Slightly in Rescue Plan Hope after Timorous Tuesday

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LONDON, Sept 30 (Reuters) - Britain's top share index ended 1.7 percent higher on Tuesday on hopes U.S. lawmakers would revive a $700 billion bank rescue plan, after earlier posting its biggest monthly decline in 21 years.

The FTSE 100 .FTSE ended 83.7 points higher at 4,902.5, after hitting a session high of 4,953.4 points and falling as low as 4,671 -- its lowest level since November 2004.

The UK benchmark plunged 5.3 percent on Monday and has lost more than 13 percent over the month -- its biggest monthly decline since October 1987 when it tumbled 26 percent.

"We really could have had the mother of all crashes yesterday," said David Evans, market analyst at BetOnMarkets.com

The City is bracing itself for further pain when markets open following the rejection of a 700 billion US dollar (£385 billion) bank bail-out.

Experts suggested that the FTSE could drop a further 200 points when London opens, wiping a further £48 billion off the value of blue chip stocks - adding to the £64 billion loss it has already sustained.

In the US, the fall-out from the House of Representatives' refusal to back the rescue plan was immediately followed by a drop of nearly 5% in the Dow Jones Industrial Average.

The move piled on the gloom over the UK economy, with fears of further contagion from the US crisis.

It comes following a day in which the FTSE plunged 269.7 points to 4818.8 - a 5.3% fall and its lowest close since April 2005.

Responding to the vote in the US, Justin Urquhart Stewart, of Seven Investment Management, said: "This is not good news at all. Although 700 billion dollars wouldn't have solved the problem, it would have helped. Things could get nasty."