Strong defensive stocks helped push the top share index higher at midday on Thursday, ahead of a European Central Bank interest rate vote and as tension mounted ahead of a European Union summit on Friday.
The FTSE 100 was up 22.28 points, or 0.4 percent, at 5,569.19 at 12:17 p.m., showing little reaction to the Bank of England's decision to keep interest rates at 0.5 percent.
The Bank also voted to stick to its four-month programme to pump an extra 75 billion pounds quantitative easing into the rapidly slowing economy.
The Bank of England is concerned that a faster flow of QE might be operationally difficult thanks to technical issues in the gilt market, and (governor) Mervyn King seems to consider such a move to represent excessive fine-tuning, Philip Shaw, chief economist at Investec, said.
The ECB, meanwhile, was expected to cut rates and unveil a new package of bank aid, while investors will also look for any hint the central bank will intensify bond-buying support for the euro zone's struggling peripheral economies, setting the stage for Friday's EU summit.
French President Nicolas Sarkozy and German Chancellor Angela Merkel will propose a plan to impose mandatory penalties on euro zone states that exceed deficit targets, aiming to restore market confidence and prevent the region's debt crisis from spiralling out of control.
The FTSE 100 has seen choppy trading on uncertainty over the outlook for the euro zone, with the index swinging through a range of about 130 points on Wednesday, for example, when comment from a German government official eroded optimism about a comprehensive deal to solve the crisis.
People are wanting to be optimistic about things but after the comments that were coming out of Germany yesterday, I think they are wary and very reluctant to take positions ahead of any further news, Martin Dobson, head of trading at Westhouse Securities, said.
Against the backdrop of heightened nervousness, traders noted moves by investors to diversify portfolios by offsetting riskier assets with defensive sectors such as pharmaceuticals and tobaccos -- the best performers on Thursday.
Some buying was seen in more risky sectors. Copper miners Kazakhmys
Copper equities offer attractive value, with the sector trading at 0.8 times NPV and 4 times 2012E EV/EBITDA ... Furthermore, companies have the ability to reinvest in growth with the majority having unleveraged balance sheets.
Banks <.FTNMX8350> also gained ground. Standard Chartered
Citigroup said the sovereign and banking crisis in the euro zone will lead to a protracted recession.
The bank said it favoured emerging market plays in the developed world and is overweight in British equities due to its heavy weighting of commodity companies and remains neutral on Europe excluding Britain, given the current concerns.
However, it suspected the region will enjoy considerable outperformance if authorities take credible steps to address sovereign concerns.
There was more gloom for the retailers in the face of austere economic conditions in Europe, following weak results from German group Metro and British company Kesa
Tesco shed 0.2 percent after the world's no. 3 retailer posted what Seymour Pierce said was an uninspiring third-quarter trading update, with sales down for a fourth quarter in a row, prompting the broker to cut its rating for the stock to hold from buy.
(Editing by Dan Lalor)