The FTSE 100 recovered its poise Wednesday after a sharp sell-off in the previous session, with gains in miners outpacing weakness in banks, although sluggish global growth figures and the threat of a Greek default weighed on sentiment.
London's blue chip index <.FTSE> was up 5.81 points or 0.1 percent at 5,771.61 by 8:59 a.m., having suffered its steepest one-day decline since mid-December Tuesday as the index dropped through key technical support levels.
Justin Haque, a pan-European equity trader at Hobart Capital Markets, said he saw massive hedging with index futures in the last hour of trading Tuesday, creating a short base for the market that has provided a temporary support level for the index.
Miners <.FTNMX1770> were the early gainers after having fallen 9 percent over the previous five trading days as the relative strength index suggested the sector was near oversold levels. Traders said they saw no real support for the miners and that the 1 percent bounce would not persist once bargain-hunters were out of the way.
Analysts were beginning to turn cautious on equities as the threat to the global recovery, particularly from persistent high oil prices, begins to gather momentum.
The strong valuation attraction present for equities in Q3 and Q4 2011 has been removed of late by the rally in equity prices, Gerard Lane, equity strategist at Shore Capital, said.
The risk is that higher oil prices will dampen economic progress, so we are inclined to recommend to move back to a neutral stance on equities, or in the very least reduce overweight equity positions with tactical asset allocation, he said.
Data overnight from Australia did little to imbue investors with confidence over the outlook for the global economy following weak readings in Europe, China and Brazil over the last two days and ahead of U.S. non-farm payrolls Friday.
Australia's resource-rich economy grew at a pedestrian 0.4 percent last quarter as business spending slipped from record highs.
Car insurer Admiral was the standout gainer, up 10.3 percent after posting a better-than-expected 13 percent rise in 2011 profit.
Admiral's shares have been recovering after a profit warning in November and a 44 percent fall in price in 2011. Admiral has gained 37 percent so far this year.
IMI added 2.3 percent as Berenberg Bank repeated its buy stance and raised its earnings estimates on the firm following the engineer's recent solid results.
Bullish broker comment also helped lift Kingfisher by 1.2 percent. Brokers said from Morgan Stanley had raised its rating on Europe's biggest home improvements retailer to overweight from equalweight.
On the downside, banks <.FTNMX8350> were under pressure again as investors waited anxiously to see whether Greece's private creditors would agree by Thursday to participate in a bond exchange, a key part of a bailout program to help Greece manage its wrecked finances and meet a debt repayment on March 20.
Anything less than 90 percent participation could mean that Greece would have to use collective action clauses, which may trigger credit default swaps.
Seven blue-chip companies went ex-dividend Wednesday - including tobacco group BAT and bank Standard Chartered - clipping a total 11.01 points off the FTSE 100 index.
(editing by Jane Baird)