The FTSE 100 pared gains by midday on Friday as doubts resurfaced about Europe's bailout package, while the prospect of an imminent Greek meltdown appeared to have been averted.
The FTSE remained up 13.20 points or 0.22 percent at 5,558.89 by 1206 GMT, but off an intraday high of 5,599.39 after German Chancellor Angela Merkel said the G20 had failed to agree on IMF resources, crucial to the European rescue package agreed last week.
The announcement offset relief that Prime Minister George Papandreou has offered to call off a referendum on the EU-IMF bailout if the conservative opposition backed the package in parliament.
Papandreou faces a cliff-hanger confidence vote tonight but government sources say he has agreed to step down regardless of the outcome after negotiating a coalition with his conservative rivals.
Banks and miners extended their rebound amid resurfacing risk appetite. Despite three straight sessions of gains, the mining and banking sectors are still on track to record a weekly loss after they dropped 9.5 percent and 7.5 percent, respectively, on Monday and Tuesday.
Overall, the mood remained one of caution as weak economic data in the euro zone added to concerns surrounding Italy and Greece.
Private sector activity in the euro zone shrank at its fastest pace in 28 months in October as the debt crisis sapped new business and soured sentiment in an economy looking like it is heading into a recession, survey data showed on Friday.
The reading added to the sense of urgency facing G20 leaders meeting in Cannes to discuss the euro zone crisis and a global economic slowdown.
US futures were mixed as investors awaited October U.S. nonfarm payrolls, due at 1230 GMT. Consensus is for a 95,000 increase, after a 103,000 rise in September. The unemployment rate is seen static at 9.1 percent.
Another healthy addition here would have the potential to sustain momentum into the weekend break, Peter Stanhope, institutional dealer at IG Markets, said.
MIXED EARNINGS PICTURE
Royal Bank of Scotland
Chip designer ARM
Elsewhere, the picture was less rosy. International Consolidated Airlines Group (IAG)
A cautious outlook statement from IAG reverberates on Intercontinental Hotels
(Editing by Hans-Juergen Peters)