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.


Royal Bank of Scotland was up 5 percent, as the bank's third-quarter profits and robust capital position helped to reassure investors.

Chip designer ARM rose 5.8 percent, topping the FTSE leaderboard, on readacross from U.S. microcontroller maker Microchip , which called the bottom of the cycle when it reported third-quarter results last night, RBS said.

Anglo American soared 3.4 percent and was among the top FTSE 100 <.FTSE> gainers after it announced a $5.1 billion (3.1 billion pound) deal to raise its stake in diamond miner De Beers.

Elsewhere, the picture was less rosy. International Consolidated Airlines Group (IAG) shed 4 percent as the merged network operator reports a 31 percent fall in third-quarter profit and confirms plans to buy Lufthansa's British unit, bmi.

A cautious outlook statement from IAG reverberates on Intercontinental Hotels , down 1.8 percent.

(Editing by Hans-Juergen Peters)