Top UK shares ended just above session lows on Thursday as oil dipped from record highs, with supermarkets group Tesco up on news of increased market share.
Banking group Lloyds TSB closed off its best level on the day, up 0.9 percent at 458-1/4 pence, as investors had second thoughts on talk that fifth largest US bank Wells Fargo could be interested in making a bid. The shares earlier touched 465-3/4p.
"There's not been an awful lot of news, maybe a little bit of silly season take-over talk about Lloyds. I don't think anyone really believes the Lloyds talk. It probably would be too big a deal for Wells Fargo," said Dave Bradbury, head of equities at Canada Life.
"I don't see the attraction to a US company. You're not going to change Lloyds into a Wells Fargo franchise. What's the point?" said a trader.
The FTSE 100 index closed 19.5 points down at 5,255.7, above a session low of 5,248.8. Volume was relatively light at 1.9 billion shares, suffering again from investor absences due to holidays.
US crude oil prices hit a new record high at $68 a barrel but later fell back as a tropical storm appeared on course to move away from Gulf of Mexico rigs, helping to boost Wall Street and bring the FTSE up from the day's lowpoint.
"It's just drifting, it really does need the oil price to roll back a bit more, all markets do. Everybody's got theories about whether it's going back down to $50 or going up to $100, the oil bulls are very much in the ascendancy," said a trader.
Investors are concerned that persistently high oil prices will stoke up inflation and further intimidate the consumer.
"Nothing is going away about these problems at the moment," said Canada Life's Bradbury.
Britain's biggest supermarkets group Tesco was the top FTSE gainer, rising 1.8 percent as a number of brokers put out bullish notes after the latest industry data from TNS late on Wednesday showing another gain in market share.
The data prompted investment bank Goldman Sachs to say Tesco was the best choice for investors in the UK food sector, adding that it saw the firm pulling further ahead of the competition in terms of like-for-like sales growth and market share gains.
Clothing retailer Next fell 1.2 percent and rival Marks & Spencer lost 0.4 percent on concerns a row over EU textile quotas on clothing from China could hit prices and margins.
Millions of Chinese-made garments have been stacking up in warehouses across the European Union because quotas agreed in June have been breached, raising concerns about empty shelves over the key Christmas shopping period.
Leisure firm Hilton Group was among the fallers, down 0.2 percent on disappointment the company had not made any detailed comment about its hotel disposal programme and concern that costs may rise at its betting division. Hilton results were in line with expectations.
British Airways, coping with uncertainty over its in-flight catering arrangements and looking unlikely to get near term relief on fuel costs, fell 1.8 percent.
Among mid-caps shares in Anglo-US steel maker Corus slipped 3.3 percent, weighed down by a slightly downbeat outlook.