Miners led the FTSE 100 lower early on Tuesday after Glencore's merger with Xstrata received a mixed reaction and investors hung on for a resolution to the Greek debt deal.
London's blue chip index <.FTSE> was down 4.93 points or 0.1 percent at 5,887.27 by 8:49 a.m., hovering around six month highs after the index added about 3 percent in the previous week.
Technical indicators suggested the FTSE was due for a pause, with the relative strength index nearing overbought levels and a short-term range on the intraday charts being established between 5784.20 to 5901.10, an analyst said.
Monday's sell-off fell short of reaching this level, suggesting there is still room to the downside. A move into this zone would be considered corrective in nature. Since the main trend is up, bullish traders may decide to buy the dip, James Hyerczyk, analyst at Autochartist, said.
The pause in recent FTSE gains has come as Greek debt talks stall and the euro zone peripheral country tries to avoid a messy default.
Greek political leaders face crunch talks on Tuesday and a full package must be approved by the euro zone, the European Central Bank and the International Monetary Fund before February 15 in order to complete legal procedures for a bond swap deal for a March 20 bond redemption.
Citigroup expects Greece to avoid disorderly default but raised the chances of a Greek euro area exit to 50 percent over the next 18 months, up from 25-30 percent.
Policymaker ability to contain exit fear contagion remains large. We continue to think that uncontained exit fear contagion would have grave implications for the rest of the euro area, the EU and the world at large, Citi said.
The sharp rally in the FTSE and the uncertainty lingering over Greece has led to a mini flight to quality and a small exit from riskier miners <.FTNMX1770>, which have led the UK benchmark index higher in 2012, up 21.4 percent in the year to date.
Glencore, the world's largest diversified commodities trading house, will issue 2.8 new shares for each Xstrata share, representing a 15.2 percent premium to Xstrata shareholders when some analysts had been calling for a 20 percent premium.
Glencore climbed 1.9 percent.
Retailers Marks & Spencer
There was no other domestic data due out on Tuesday.
On the upside, heavyweight BP
The company has marked a further milestone in its route back to relative normality, whilst the dividend outlook is promising, a London-based trader said.
Oil explorer Cairn
(Written by David Brett; Editing by Sophie Walker)