(Reuters) - Britain's top share index rose slightly higher on Thursday, in choppy trade, as banks continued to feast on the liquidity served up by a host of central banks, while miners were under pressure after poor data from China.
The FTSE 100 rose 7.25 points or 0.1 percent at 5,512.67 by 0858 GMT, having added a meteoric 3.2 percent in the previous session, after central banks on Wednesday announced coordinated global action to provide liquidity to the financial system.
Gains on Wednesday all but wiped out November's losses, as the coordinated steps by central banks provided a short-term fix to the credit squeeze threatening the economic recovery brought on by global debt problems.
Previously beaten down banks were higher as short-term sentiment surrounding the sector remained upbeat following Wednesday's co-ordinated actions by the central banks.
Banks clearly face an extended period of poor fundamentals, including sub-trend profitability and deleveraging, which is negative for earnings and book value. However, valuations are historically very low, Nomura said in a note.
Nomura said it views Barclays as relatively investable among the domestic banks, despite the challenges BarCap faces, but Lloyds and RBS are more uncertain.
Elsewhere on the upside, Kingfisher topped Britain's FTSE 100 .leader board, up 3.9 percent, after the home improvements retailer beat third-quarter earnings forecasts in spite of a tough economic backdrop.
Worries over the broader economy remained, with some analysts seeing the move on Wednesday by the central banks as just a short-term fix to longer, deeper lying issues.
The latest response is clearly a positive for sentiment and it might encourage thoughts that central banks will eventually do whatever it takes to avert the worst case scenarios further down the road, Jim Reid, strategist at Deutsche Bank Said.
It doesn't, however, change the poor fundamentals for Sovereigns and banks, it just releases some short-term pressure.
Investors will watch later this morning to see how the latest French and Spanish bond auctions are received in light of the positive wave of the last 24 hours.
Spain's borrowing costs are likely to leap to 14-year highs on Thursday, as the euro zone enters a critical phase in its two-year debt crisis and investors ponder how long it will take before rising yields scare buyers away.
Warnings surrounding the broader economy remain after EU Economic and Monetary Affairs Commissioner Olli Rehn told the European Parliament, European leaders had 10 days to save the euro.
With concerns over Europe's debt stifling growth Goldman Sachs said in the near term the market has further to fall as recession is further priced in and earnings downgrades accelerate, although its economic forecasts assume some resolution to the Eurozone debt crisis at some point in the next few months.
The bank said it has moved more defensive in its sector portfolio, upgrading healthcare to overweight and downgrading Banks to underweight.
Riskier miners weighed on the FTSE 100 after poor Chinese manufacturing data heaped demand concerns on the sector.
China, which cut its banks' reserve requirement to shore up the economy on Wednesday, said its factory sector shrank in November for the first time in nearly three years, a sign the debt crises in Europe and the U.S. were having an effect on the world's fastest growing economy.
Vedanta fell 2.1 percent as Credit Suisse cut its rating to neutral from outperform as it sees lower global growth squeezing the miner's margins.
In terms of domestic economic data, investors will look at UK November Markit/CIPS manufacturing PMI, scheduled for release at 0928 GMT.