Britain's top share index ticked higher in early deals on Thursday as gains by banks and miners were countered by weak defensives although signs that the recession was abating in the U.S. provided underlying support.
By 0816 GMT, the FTSE 100 index was 7.98 points, or 0.2 percent higher at 3,976.38 after an early peak back above the 4,000 level failed to hold.
The UK benchmark index closed 20.59 points, or 0.5 percent lower on Wednesday and is down 10.5 percent so far this year, after dropping over 31 percent last year.
"To be honest, I think it is just really that a little bit of good news crept in from the (Federal Reserve's) Beige Book last night suggesting that economic activity was bottoming out," said David Buik, senior partner at BG Capital Partners.
U.S. stocks gained on Wednesday after data showed that manufacturing activity in New York State contracted less severely in April while the Fed's Beige Book showed the speed of the contraction in the economy was fading.
Banks were the main gainers in London after financials led the advance in New York helped by positive comments in results from American Express and ahead of numbers on Wednesday from JP Morgan Chase.
Royal Bank of Scotland was the top FTSE 100 gainer, up 4.3 percent, while Lloyds Banking Group and Barclays added 3.7 and 2.5 percent respectively.
"Expectations are that JPMorgan results could well be OK, and also that the bank, like Goldman Sachs, might say thanks very much for the TARP (Troubled Asset Relief Program) but we don't really want it, which the market could see as positive," Buik said.
However Asian-oriented bank Standard Chartered missed out on the sector rally, down 0.1 percent reflecting weakness in Hong Kong on profit-taking following mixed GDP data from China.
China's economy slowed in the first quarter to its weakest pace on record, but an improvement in data for March offered tentative signs that the worst may be over for the world's third-largest economy.
For a breakdown of the China GDP data, click on and
Strength in heavyweight miners also provided underlying support for UK blue chips, with the sector higher as copper prices rallied, although the China GDP data took some of the shine off the metal's rise.
Xstrata, Antofagasta, Rio Tinto, Kazakhmys gained between 1.4 percent and 3.8 percent.
And mobile telecoms group Vodafone added 1.1 percent helped by an upgrade from Bernstein to "outperform" from "market perform".
TRADING UPDATES TRIO FALL
Packaging firm Bunzl was the biggest blue chip faller, down 10.2 percent after a trading update said its underlying sales fell marginally in the first quarter.
Credit checking firm Experian also fell back after a slightly cautious trading update, down 4.7 percent, with the group saying the environment for lending has not improved.
And brewer SABMiller shed 1.2 percent after revealing a fall in beer sales as economic conditions worsened and demand fell in most of its markets.
Otherwise defensive issues saw Wednesday's rally reversed as market sentiment continued to oscillate, with Unilever down 2.1 percent, Imperial Tobacco off 1.6 percent, and Drax Group losing 1.7 percent.
There were more signs that the UK economy is still facing fierce headwinds. British like-for-like retail sales fell year-on-year for the second month running in March, the British Retail Consortium said.
"It's very much a dog-eat-dog world out there for retailers at the moment. Trading conditions are immensely tough, but those who find the balance between discounting stock and keeping sufficient margins will be the ones that survive and eventually prosper," said Rob Pike, head of trading at ShortsandLongs.com.
