Britain's top shares closed higher on Tuesday, helped by buoyant US consumer confidence data and gains by online gamer PartyGaming and catering company Compass Group, but Barclays fell on a mixed trading update.
Shares in PartyGaming climbed 7.8 percent after investment bank Morgan Stanley started coverage of the company with an "overweight" rating and said it enjoyed a leading position in a high-growth industry. The world's biggest online poker operator regained its float price of 116 pence 13 weeks after its warning on poker growth dented its market value.
The FTSE 100 closed 13.6 points higher at 5,491.0 points, recovering after the previous session's 46 point drop but losing a struggle to hold above 5,500. The index had touched a fresh four-year high of 5,555 on Monday. "The FTSE ... has hit a psychologically important level but the fundamentals that have driven the market upwards - a reasonably robust global economic environment, high levels of liquidity amongst investors and relatively attractive valuations - haven't actually changed," said Akber Khan at Deutsche Bank's equity focus team.
"Is it possible that we have short term consolidation? Yes. Is it the end of the rally? Probably not."
Market watchers said news that US consumer confidence picked up strongly in November reflecting weaker petrol prices and better job prospects could weigh against equities if US authorities felt it necessary to hike interest rates to dampen inflationary pressures.
"Obviously it's pointing to strong economic growth in the United States, but the flip side is it's putting upward pressure on US interest rate expectations," one strategist said.
Mining shares were strong, with Anglo American, Antofagasta and BHP Billiton rising between 1 and 2 percent as copper hit fresh record highs and gold held close to 18-year highs.
US crude oil prices fell to around $57 a barrel, pressured by balmy weather in the United States, pushing oil stocks such as BP and Cairn Energy lower and helping to curb gains in the FTSE 100.
Barclays was the biggest blue chip faller in the UK, down 1.1 percent, as rising costs dulled the shine on its growth outlook following a trading update. The bank said it would broadly meet profit growth expectations, but the shares dipped as investors worried that analysts would be miserly with upgrades.
"There's no profit upgrades to come," said Colin Morton, fund manager at Rensburg Fund Management. "It's a decent statement but there's no further impetus for the shares to move forward, having gone up over 10 percent in the last six weeks."
On the upside, Compass rose 8.1 percent even though the world's largest catering company posted a near 10 percent fall in annual profit. Dealers said the numbers were broadly in line with expectations.
"The results are not necessarily good but they're not as bad as some people had feared," a dealer said. But analysts said concerns remained over UK cost pressures and a UN investigation into alleged UN-related contract bidding irregularities.
Shares in insurer Royal & Sun Alliance gained 2.4 percent after investment bank UBS raised its price target and earnings forecasts following a meeting with RSA Finance Director George Culmer.
Mid-cap Brambles jumped 10.2 percent, tracking gains in Australia, on its plans to sell off its Cleanaway waste management arm and two other units to focus on its profitable pallet and data management arms.
Shares in Reg Vardy rose 8.2 percent to 795p after Britain's second-largest motor retailer said two new bidders had emerged following a 750-pence-a-share bid received this month from the UK's biggest car seller, Pendragon.