Britain's FTSE 100 index of leading shares ended almost flat on Friday, supported by strong US employment data and an upbeat survey of UK service sector firms but wary of looming interest rate rises.
Stock markets across Europe and on Wall St rallied shortly after the US Labour Department said on Friday the country's jobless rate fell to 4.4 percent, its lowest in more than five years. But US stocks quickly lost ground.
While the unexpected strength of the US labour market allayed some fears the world's biggest economy was heading for recession next year, analysts said it means the Federal Reserve is less likely to cut interest rates any time soon.
Earlier, a monthly survey of British service sector firms showed business activity growing at its fastest in six months in October. The news was positive on the overall economy but reinforced expectations the Bank of England will raise key interest rates again next week.
"The (UK) PMI data was surprisingly strong and US jobs were a touch stronger than expected," said Clive McDonnell, European strategist at Standard & Poor's Equity Research. "That is indicating the UK economy has legs while the weakness in the US has not worsened."
The FTSE 100 closed at 6148.1, down 1.2 points or 0.02 percent on the day. Oil stocks helped fuel the FTSE's rise, as US crude oil prices climbed back above $58 a barrel after the United States warned a militant group may have plans for imminent attacks on Nigeria's oil facilities.
Shares in Shell rose 1.3 percent after it said on Thursday it was resuming production of about 47,000 barrels per day at two of its Nigerian flow stations.
It's rival BP added 0.7 percent after a newspaper report that India's Reliance Industries Ltd, which is planning two major acquisitions in Europe, has set its eyes on a Belgian arm of the oil major.
Medical equipment maker Smith & Nephew gained 4 percent after a newspaper reported it had confirmed holding preliminary talks with US medical devices company Biomet about a tie-up. The stock was also boosted by broker upgrades.
Shares in Friends Provident gained 3 percent after the insurer's plans to triple its new business profits by 2008 was cheered by analysts and traders said talk of life insurance take-over activity continues to simmer.
Renewed talk Japan Tobacco could bid for Gallaher Group, the world's fifth largest cigarette maker, pushed the firm's shares up 1.6 percent, traders said. Rival tobacco companies Imperial Tobacco and British American Tobacco ticked up 0.6 and 1.3 percent respectively.
Shares in British Energy gained about 2 percent, following through from gains made in the previous session after reports the company made a submission to the government on the policy framework for new nuclear investment, traders say.
Dominating the FTSE losers, packaging company Rexam ended down 4 percent after it said on Friday it would take a 10 million pounds ($19 million) charge in 2006 for restructuring its Make-Up unit, largely in South East Asia.
British Airways slid 3.5 percent after it reported a fall in second-quarter profits following a wave of flight disruptions related to security scares at UK airports during the summer. Also on the downside, retailer DSG International shed 3 percent after government data on Friday showed higher UK mortgage repossessions and insolvencies in the third quarter.
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