(ADVISORY: UK markets will be closed on Monday for a public holiday and there will be no FTSE report. Coverage will resume on Aug. 31)
* FTSE 100 rises 0.9 percent to end above a key technical level
* Strong demand in telecoms; Vodafone up 2.8 percent
* Bernanke says Fed ready for further steps
By Dominic Lau
LONDON, Aug 27 (Reuters) - Britain's top share index rose 0.9 percent on Friday, lifted by telecoms, and ended two straight weeks of losses, though trading was thin as investors remained wary of the United States slipping back into recession.
U.S. Federal Reserve Chairman said the recovery has weakened more than expected and the central bank is ready to take further steps if needed, while U.S. growth was revised down to 1.6 percent in the second quarter from a previous estimate of 2.4 percent, though it was better than analysts' forecast.
Defensive stocks were in demand, helping the FTSE 100 to closed 45.72 points, or 0.9 percent, higher at 5,201.56 in a choppy session. The index traded as low as 5,121.00 soon after Bernanke's remarks.
The UK benchmark closed 0.1 percent higher for the week, ending a two-week losing run, and was above 5,187.41, its 38.2 percent Fibonacci retracement level of the peak in April to the low on July 1.
"It's a crazy day ... Some of the big houses think there is value out there," a London-based trader said. The FTSE 100 is still down 3.9 percent this year.
"The newsflow is negative and short-term I can't see any better. I think it's more of a squeeze and volume is pretty light," he said.
Volume was 69 percent of its 90-day daily average.
Mobile phone operator Vodafone, which carries a dividend yield of 5.6 percent, climbed 2.8 percent.
Fixed-line telecoms shares, which have fallen nearly 4 percent this year, advanced 2.8 percent, with Cable & Wireless Worldwide up 5.7 percent.
The FTSE 100 offered a dividend yield of 3.55 percent, Thomson Reuters Datastream showed, compared with the 2.901 percent from benchmark 10-year British gilt.
"Purchasing high-dividend shares sounds like a safe way to raise equity exposure in a still uncertain macro environment," Credit Suisse said in a note.
"However, the main risk of such strategy lies in the sustainability of these dividends."
Forty-two UK blue chip companies have had their dividend per share forecast for 2010 upgraded by analysts since last month, versus 44 downgraded, Datastream showed.
African Barrick Gold rose 4.3 percent, helped by firmer gold prices on the prospect of further quantitative easing, while the mining sector added 0.7 percent.
Tullow Oil was the top faller, down 3.8 percent, after two Ugandan newspapers said the Ugandan government had refused to extend one of the company's exploration licence. The UK oil explorer declined to comment.
(Editing by Erica Billingham)