The top share index rose slightly by midday on Friday, with banks higher as investors cautiously awaited a Greek debt deal, retailers benefiting from strong UK sales data and M&A talk and miners also gaining.
London's blue chip index <.FTSE> rose 19.36 points, or 0.3 percent at 5,904.74 by 11:59 a.m., but the index was tethered around the 5,900 level as investors awaited confirmation of a bailout payment for Greece.
Banks gained as any deal struck with Greece would remove some uncertainty over their balance sheet exposure to Europe's debt crisis. Royal Bank of Scotland
Miners were higher, following a bout of profit-taking over the previous three sessions.
High street retailers also ticked higher, with Marks & Spencer
This morning's UK retail sales figure was staggeringly strong and has caught the market completely offside. On the back of December's strong retail sales growth, this represents an excellent start to the year, Richard Driver, analyst for Caxton, said.
Investors will also have one eye on the U.S. after the strong macro-economic data in the previous session, with Wall Street pointing to a flat to higher open ahead of January's consumer prices data due to be released at 1:30 p.m., along with real weekly earnings.
Wm Morrison Supermarkets
Britain's third-biggest supermarket group rose 1.1 percent and extended the previous session gains on speculation of a bid from the Qataris, according to various market reports.
With valuations looking cheap -- the FTSE 100 trades on 10.6 times 12-month forward price-to-earnings, compared with its 10-year historical average around 14 times, according to Thomson Reuters data -- and companies sitting on huge cash piles, analysts said M&A could be a theme that dominates through 2012.
Oil explorer Bowleven
Oil and gas firm Tullow
Volumes on the FTSE 100 remained weak at just 43 percent of their average 90-day volume around midday, suggesting investors were cautious over the prospect Greece would secure its second vital bailout.
Greece needs to seal a 130 billion euro (108 billion pound) rescue and avoid bankruptcy, although doubts remained over lenders' demands for tighter supervision of how Athens will implement the deal.
Euro zone sources said national central banks in the currency bloc would exchange holdings of Greek bonds this weekend in the run-up to a private sector debt deal to avoid taking forced losses.
After hefty negotiations, we expect that the Eurogroup will give the green light to allow Greece go ahead with the PSI at the meeting on Monday, Citigroup said.
However, with the open issues regarding debt sustainability and the enforcement of the programme measures, we expect that there will be no approval of the second bailout package on Monday, it added.
Markets, however, retained their optimism with bond yields in other indebted euro zone countries such as Italy and Spain easing slightly, while riskier UK-listed equities such as banks and miners edged.
The cost of insurance on Greek debt, however, continued to suggest that in the longer term Greece could eventually default, albeit in an orderly manner.
Broker comment weighed on some financial stocks, with Ashmore
(Writing by David Brett; Editing by Helen Massy-Beresford)