By Tricia Wright

LONDON (Reuters) – UK shares bounced back after two days of losses on Wednesday, taking their cue from Wall Street, where worries about valuations, particularly in high growth firms in the technology sector, appeared to fade.

In the UK, tech stocks were back in demand, with ARM Holdings sixth-biggest gainer on the FTSE 100 index, up 2.3 percent, while Peppa Pig owner Entertainment One was the second-biggest mid-cap gainer, up by 6.1 percent.

The FTSE 100 index was up 41.74 points, or 0.6 percent, at 6,632.43 points by 0812 GMT, following a 0.5 percent fall the previous session which came on the heels of Monday’s 1.1 percent loss.

Wall Street’s advance was led by a 0.8 percent rise in the Nasdaq, home of tech companies, which recovered some of its poise after its steepest three-day drop since November 2011.

While the sharp losses this week have seen the UK benchmark’s technical picture deteriorate, with the index having dropped below its 50- and 100-day moving averages on Monday, traders reckoned it has found a floor from which to rise.

Concerns over the situation in Ukraine may cap any gains for now, however, after the United States accused Russian agents on Tuesday of stirring separatist unrest in eastern Ukraine.

“Technology stocks in the U.S. rebounded last night which should add some support this morning, and it feels like we have found a bottom for now, although events in the Ukraine might keep investors wary of dipping their toes back in for now,” Mark Ward, head of trading at Sanlam Securities, said.

UK housebuilders received a fillip from a bullish note on the sector from Deutsche Bank, traders said, with the investment bank saying their sensitivity to interest rates has been overestimated.

Barratt Developments led blue chips higher with a 2.7 percent rise, while among midcaps Taylor Wimpey added 2.7 percent and Bovis Homes climbed 1.4 percent, as Deutsche Bank named the trio its top picks.

Deutsche Bank said UK housebuilders’ shares had been weak due to concern that the Bank of England could raise interest rates sooner than previously expected.

“However, with easy affordability, significant lending aspirations from banks combined with a willingness to reduce their spreads further, we believe the share price reactions have been overdone,” it said.

The Thomson Reuters UK Homebuilding index has risen 3 percent in 2014. It doubled in value during the past three years, underpinned by tight supply and UK initiatives to spur the job-intensive sector, such as the ‘Help-to-Buy’ mortgage scheme.

Some analysts reckoned on a period of consolidation for the FTSE 100 at least until the current reporting season gets underway. Aluminium group Alcoa kicked off proceedings in the United States last night, reporting earnings ahead of expectations as revenues missed forecasts.

“It’s very possible we’ll be treading water now until such time as the Q1 reporting season really kicks in,” said Richard Hunter, head of equities at Hargreaves Lansdown.

“We’ve been waiting for some kind of catalyst to drive the market forward again, and hopefully it’s something that we might see from the Q1 reporting season.”

(Reporting by Tricia Wright; Editing by Hugh Lawson)