Britain's top share index edged higher on Wednesday, recouping part of the previous session's losses after overnight testimony from the head of the Federal Reserve kept hopes of further U.S. monetary stimulus alive.
The UK blue chip index was up 8.89 points, or 0.15%, at 5,636.56 by 0808 GMT, having closed 0.6% lower in the previous session. Traders said they expected the index to remain technically rangebound in the near term.
Fed Chairman Ben Bernanke will deliver further testimony to the U.S. Congress on Wednesday, having echoed previous statements in his comments on Tuesday, leaving the door open to a third round of monetary stimulus.
"QE3 is almost certainly coming at some point during the second half of this year, but the short-lived impact of the Fed's prior stimulus efforts should remind investors not to get too excited by the prospect," Ian Williams, strategist at Peel Hunt, said.
Caution was evident as defensives Vodafone, liked for its dividend, and pharmaceuticals stock GlaxoSmithKline were the top risers on the FTSE 100.
Stimulus hopes should provide a floor to any downside for beaten-down cyclical stocks such as the banks, up 0.2%, traders said.
The sector is trading on a below par 12-month forward price-to-earnings 8.9 times, compared with 9.8 times for the FTSE 100.
Other financials gained too, with emerging markets-focused funds house Ashmore Group continuing to recover from recent sharp falls following a downbeat update. The stock rose 4%, also boosted by a Goldman Sachs upgrade to "buy" from "neutral" in a note on asset managers.
Fund firm Schroders was also an early gainer as Goldman Sachs added the company to its conviction buy list.
TIGHT RANGE
The UK benchmark index has been stuck in a tight trading range between 5,600 and 5,700 since late June, just after the market rallied 7.6% in 6 weeks as central banks in Europe and China took action to try help stimulate global growth and help boost company profits.
Earnings were a focus among miners, which continue to be dogged by growth and cost worries.
Concern of over demand from China, the world's most ferocious consumer of raw materials, pegged back BHP Billiton shares. The shares fell despite the Australian miner posting strong growth in iron ore production in the June quarter and saying it expects to lift Australian iron ore output by 5% in the 2013 financial year.
Rio Tinto, which reported steady output on Tuesday, fell 1.6% as UBS cut its target price on the company.
Fresnillo, liked by fund managers as a proxy for gold, rose 3.3%. There was relief as the Mexican precious metals producer said silver and gold output was on track to meet its targets for 2012.
Land Securities fell 0.7% after a first-quarter update. The stock was weighed by a downgrade by Barclays, which also cut its rating on peers Hammerson and British Land — down 1.7% and 0.7%, respectively — on valuation grounds in a note on real estate firms.
In the same sector Capital Shopping Centres rose 1.3% as Barclays upgraded the firm to "overweight" from "equalweight".
