Banks support FTSE

Britain's top shares ended a shade higher on Tuesday, notably banks, after a better than forecast report on industrial output in the United States and as Fitch confirmed that nation's top credit rating with a stable outlook. The UK benchmark index ended up 7.05 points, or 0.1 percent, at 5,357.63, having spent much of the day in the red, dipping as low as 5,265.83, on weak German GDP data.
Volumes were thin, however, at 78.2 percent of the 90-day average, exaggerating the index's moves. Banks , pressured earlier in the day, found support after the Fitch announcement, giving the world's largest economy a reprieve after it was downgraded by Standard & Poor's little more than a week ago. Strength from integrated oil stocks also helped prop up the index, with the sector staging something of a recovery as the buoyant US data pulled oil prices off earlier lows.
US industrial output rose in July at its fastest pace in seven months as strong auto production boosted manufacturing, and as Americans turned up the air conditioning to combat hot weather. BG Group firmed 1.9 percent, but Royal Dutch Shell and BP slipped 0.5 percent and 0.1 percent, respectively.
Trading was choppy heading into the close as investors keenly awaited news out of the meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel. A press conference was scheduled for 1600 GMT. The data showing German gross domestic product growth slowed by more than expected in the second quarter brought the eurozone debt situation sharply into focus, with traders saying it raised doubts about the ability of the country to help out the weaker economies.
"On one side you've got the indebted European countries, but actually there were real hopes that core Europe would continue to grow strongly and that of course at least gave them some breathing space to try and solve some of the (region's) problems," Henk Potts, market strategist at Barclays Wealth, said. "I guess this calls into question whether core Europe can really grow in isolation from the problems that are being experienced by its major trading partners around it."
Sentiment was further soured by a subsequent reading of euro zone GDP, which showed the region's economy grew less than forecast in the second quarter. Gold miner Randgold Resources grabbed the top spot on the FTSE 100 leader board, as uncertainty ahead of the Merkel/Sarkozy meeting boosted the gold price.
Old Mutual gained 2.5 percent as J.P. Morgan Cazenove upgraded its rating for the South Africa-focused insurer and fund manager to "overweight" from "neutral" following recent first-half results. Upbeat broker sentiment also gave British American Tobacco a lift, up 2 percent, after Nomura increased its earnings per share estimate and price target for the cigarette manufacturer.
ARM Holdings , meanwhile, firmed 1 percent, with traders citing strength in global technology stocks and a change in the mobile landscape following Google's take-over of handset maker Motorola Mobility announced on Monday. Broker Merchant Securities said the $12.5 billion take-over by Google raised the opportunity for faster product innovation from rivals that would continue to drive the adoption of smart-phones and cellular connected tablet personal computers.
Traders were doubtful of the FTSE 100's ability to sustain its upward momentum, with the index having seen a jump of 7 percent over the last four days. "It seems likely that there will be no big policy announcement from Sarkozy/Merkel meeting. We remain cautious on this market, as we have rallied very quickly from the lows and may note be able to maintain those moves," said Darren Sinden, senior sales trader at Silverwind Securities.