Britain's top share index pared gains on Monday in choppy trade as investors juggled their positions ahead of potential further easing of monetary policy in the United States, with miners higher after strong data from China.
By 1135 GMT, the FTSE 100 was 10.85 points, or 0.2%, higher at 5,686.01, having fallen 1.2% last week. It earlier touched an intraday high of 5,733.01.
"This is a big week for markets with central bank meetings taking centre stage as investors await news on any further QE plans," Ben Critchley, sales trader at IG Index, said.
"With the latest U.S. Federal Reserve announcement due out on Wednesday evening, we could be in for a couple of days of choppy, nervous trading for shares as traders wait to see if their expectations for QE2 are going to be met."
Miners rose after data showing demand in China, the world's biggest consumer of metals, was holding up.
The world's biggest integrated zinc producer Xstrata climbed 2.4% and copper miner Kazakhmys added 1.8%, also supported by rallying metal prices as the dollar weakened on the prospect of more cheap cash being pumped into the U.S. economy to stimulate growth.
However, gains were clipped after a survey of purchasing managers showed British manufacturing growth accelerated last month, suggesting growth in the fourth quarter will not slow as dramatically as many had anticipated.
Traders said the UK data all but ends any hopes that the Bank of England would extend its own QE programme before the end of 2010, therefore slightly weakening the case for buying equities against other asset classes such as sterling which rose against the dollar.
Only one of the 57 analysts in a Reuters poll reckoned the UK central bank would opt to expand its 200 bln pound asset purchase programme this week.
But 22 of them see a chance of it injecting more stimulus early next year as government spending cuts start to bite.
BANK ON IT
Buyers came in for the banks, with traders citing a note from Macquarie in which the broker repeated "outperform" ratings on HSBC, up 0.6%, and Barclays, up 0.4%, ahead of third-quarter trading updates on November 5 and 9, respectively.
Lloyds Banking Group, scheduled to issue a trading update on Tuesday, added 1.8%, while Royal Bank of Scotland rose 2.7% ahead of its update on Friday.
Technology firm Smiths Group advanced 2.4%, making them among the top risers in the FTSE 100, with traders citing a heightened security alert after two bombs were found on U.S.-bound planes.
Serco Group dropped 6.4 percent after weekend newspaper reports revealing a letter the firm had sent to suppliers seeking a 2.5% rebate on the 2010 full year spend, prompting Numis to cut its rating to "reduce" from "hold".
"On a current year price earnings of over 18 times there is no room for errors which tarnish the group's reputation," Numis says in a note.
Peer Capita Group was down 1.9%.
Weir Group shed 2.8% after the engineer issued a trading update.
U.S. futures pointed to a stronger start on Wall Street on Monday, with manufacturing data due at 1400 GMT.
