Britain's top share index lost much of its earlier gain on Thursday after British Airways extended its losses, with investors disappointed by news the UK and United States are investigating air travel prices.
Shares in BA ended down 5.9 percent at 346 pence, just off their lowest level for the session at 344-1/2p, after the airline said Britain's Office of Fair Trading and the US Department of Justice are probing alleged cartel activity - relating to pricing - involving the UK airline and others.
The airline also said its commercial director Martin George and head of communications Iain Burns had been given leave of absence during the investigation.
"Putting key personnel on leave is a difficult signal for the market to interpret and these investigations can take months so we believe this news will mark the end of BA's recent strong performance in difficult markets for the time being," Deutsche Bank analysts said in a note.
The FTSE 100 share index closed up 19.1 points, or 0.3 percent, at 5,684.1 - a two week closing high. But the benchmark failed to hold an earlier intraday high of 5,736.8.
Although the FTSE was still about 7 percent off 5-year highs hit in April, some markets say confidence is improving as fears over the impact of possible higher interest rates subside.
"The markets are in the process of trying to settle down after high volatility in May and June," said Andrew Bell, equity strategist at Rensburg Sheppards.
"It would be too optimistic to assume the uncertainty of interest rates, inflation and oil prices has worked itself out to the market - the market probably needs reassurance."
Shares in energy stocks fell, with British Energy off 2.2 percent and Drax 2.1 percent lower.
"It's a combination of weaker electricity prices and the fact the market's just so jittery," said one trader.
Shares in oil majors BP and Royal Dutch Shell also failed to hold onto earlier gains and managed to snatch only modest gains as crude prices eased slightly despite data showing robust US demand.
Bid speculation sent shares in supermarket chain Morrison as much as 3 percent higher to 201-1/4 pence, with dealers citing talk of a possible bid for the company from private equity groups.
Separately, traders reported talk that acquisitive Icelandic company Baugur may pull its bid for department store chain House of Fraser. The UK firm's shares fell 3.4 percent.
Back on the upside, housebuilder Persimmon added 4 percent, with dealers and analysts saying buoyant first-half results from Crest Nicholson provided the sector with a firm start to the earnings season.
But among mid-caps, shares in mortgage bank Bradford & Bingley dipped 2.7 percent after news it may take another charge to cover liabilities related to mis-selling of past endowment policies outweighed an otherwise upbeat trading statement. Dealers added that there was also concern about possible margin pressures.
Shares in Britain's largest capital works consultancy WS Atkins, headed up, adding more than 8 percent after it posted a rise in annual profits and said its outlook remained positive thanks to broad, strong demand.
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