Britain's FTSE 100 index ended flat on Tuesday, within sight of recent 7-week highs, as a rise in property stocks on easing interest rate fears cushioned a retreat by oil shares. Hammerson, Britain's fourth-largest property group, climbed 3.2 percent while British Land and Land Securities rose around 2.8 percent each.
Investors also cited talk of fresh Middle Eastern investment interest as a supporting factor. Some strategists said a broader recovery was in place after rate fears and volatility gave equities a thumping in May. Markets were closed in the United States for Independence Day, and trade was thin in London.
"You have got to look at today in the context of what we have seen over the last few days. Generally the market is still recovering the losses that it made in May," said Darren Winder, UK equity strategist at UBS.
"I think it's clearly rallied quite strongly off the lows that we saw a few weeks ago and is giving up some of those gains today. Generally I think there's perhaps a removal of some of the pessimism that seeped into the market back in May."
The FTSE closed down 0.9 points at 5,883.5, breaking a winning streak which put more than 230 points onto the index over the past four sessions as concerns eased last week that the US Federal Reserve would continue its aggressive interest rate tightening policy for much longer.
Broker upgrades helped a handful of stocks including retailer Marks & Spencer, up 1.9 percent after Goldman Sachs added the shares to its conviction buy list. Mobile phone giant Vodafone gained 1.1 percent after Deutsche Bank raised the shares to "buy" from "hold".
Market heavyweight BP fell 0.8 percent as investors had second thoughts about the oil major's production update on Monday which pointed to falling production in the second quarter. "There's quite a bit of negative press about on the BP figures, talking about analysts cutting production for the third quarter, that's seen as negative by a few people," said a market maker.
Smith and Nephew was amongst the biggest losers, down 2.5 percent on the day, and some market makers said this was related to the subpoena it received from the US Department of Justice last week for documents relating to possible antitrust issues over joint implants.
Rumours that French bank Credit Agricole could walk away from a potential bid for UK's Alliance & Leicester took its toll on the UK mortgage lender's shares, which closed down 1.5 percent. Among mid-caps, photo booth operator Photo-Me jumped more than 6 percent on a revival of bid speculation. The company said last month it had been conducting a strategic review, which may lead to an offer being made for it.
"People are thinking something might have developed in that situation," said a trader. Health and beauty retailer Boots closed down 1.8 percent after an extraordinary general meeting over its merger with Alliance Unichem. Traders say potential synergy savings are fully discounted by the share price and that Dresdner Kleinwort Wasserstein recently turned negative on the stock, saying the shares were overvalued.
Continuing merger-and-acquisition talk kept selected stocks in solid territory including catering group Compass, which held up in the weak market on speculation of private equity interest. The shares were also supported as Richard Cousins takes over as chief executive from Michael Bailey.
"The share price move is giving the new chief executive the benefit of the doubt, and pricing in the hope and expectation of him turning things around, but it's going to take a long time," said a trader. Midcap property companies moved up in parallel with FTSE 100 property companies with Great Portland up 5.9 percent and Shaftesbury up nearly 5 percent.
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