Britain's top share index was down 0.8 percent early on Tuesday as miners retreated sharply, while initial optimism faded on Washington's plan to relieve banks of toxic debt and financials lost ground.
At 0939 GMT the FTSE 100 index was 30.50 points higher at 3,922.31, reversing early gains and snapping a three-day winning streak but it was over 13 percent higher than its low on March 9.
The blue-chip index closed up 2.9 percent on Monday, its highest closing level in almost a month and a third straight day of gains, but is still down 10.1 percent this year.
Miners were the biggest drag on the index, tracking a fall in base metals which had rallied in the previous session. Copper slid from a new 4-1/2 month peak hit on Monday as investors locked in gains.
Shares in Anglo-American fell 5.9 percent, despite news it is looking at possible iron ore joint ventures or acquisition opportunities in Australia.
Rio Tinto dropped 5.4 percent after the mining company said its proposed deal with Chinese state-owned Chinalco would not influence iron ore contract price negotiations for the year ahead.
BHP Billiton and Xstrata fell 4.5 percent and 5.6 percent, respectively.
Asian equities rose to their highest in two months, tracking a 7 percent surge in the U.S. after the Obama administration on Monday offered a raft of incentives to woo private investors into buying up to $1 trillion in toxic assets.
But optimism was tempered by the bleak macro-economic backdrop.
"People are calling the end of the bear market but we haven't reached the bottom of the economic cycle. There's at least three months of painful stuff to come," said David Buik, senior strategist at BGC Partners said.
Credit Suisse said in a note that it was sceptical about the impact of the U.S. plan on banks.
"It is every policymaker's dream that the private sector will realise that assets are mispriced and pour in capital to correct such a mispricing," it said.
"In reality the private sector is shell-shocked, ultra cautious and at the very least such an allocation of capital will take some time to implement."
Financials quickly retreated from early gains with Barclays down 1.5 percent, having earlier gained over 6 percent.
Heavyweight HSBC fell 4.3 percent while Lloyds fell 1.3 percent, but Royal Bank of Scotland and Standard Chartered stayed in positive territory.
Emphasising the difficult policy dilemma facing the Bank of England consumer price inflation rose unexpectedly in February to 3.2 percent, forcing BoE governor Mervyn King, to write a letter explaining why it remains so far above the 2 percent target.
Oil majors fell as crude edged down from its more than 3 percent rise on Monday but still remained above $53 a barrel. Royal Dutch Shell, BP and BG Group were down 0.5-2.1 percent.
Mobile telecoms gained and shares in BT Group were up 0.5 percent after a newspaper report said it is ready to release its superfast broadband network to six UK cities by 2010.
Defensive drugmakers were also in demand, with GlaxoSmithKline up 1.5 percent and AstraZeneca adding 0.7 percent.
