Britain's leading shares ended up 0.14 percent on Monday as mining stocks and retailer Marks & Spencer supported but Northern Rock weighed in a choppy trading session. The FTSE 100 was 9.2 points higher at 6,465.9 at the close, after touching a low of 6,437.3 earlier in the day.
BHP Billiton added 5.7 percent to lead the mining sector higher after it said it plans an update on its reserves this week. It declined to say whether that would include an upgrade to the gold resource at its giant Olympic Dam mine. Firm metal prices also helped, with Xstrata up 4.6 percent, Antofagasta climbing 6.6 percent and Rio Tinto gaining 4.1 percent.
"Investors still believe there are some big hurdles to overcome. For those who are willing to stomach the volatility, valuations look incredibly cheap," Henk Potts, equity strategist at Barclays Stockbrokers, said. Clothes-to-food retailer Marks & Spencer climbed 4.4 percent to 589.5 pence.
Traders cited a positive broker note from Deutsche Bank which said M&S's shares have underperformed the market by 20 percent over the last four months due to concerns a slowing UK consumer will hurt the business.
But they added: "We believe H2 will prove a positive surprise and that profits growth will re-accelerate." The bank has a price target of 815 pence with a "buy" recommendation. UK insurer Prudential tacked on 2.7 percent after Lehman Brothers lifted its target price on the stock by 4 percent to 1,060 pence.
Lehman analysts said cash flows are improving rapidly enough not to constrain growth and that material increases in the dividend could be on the horizon. Northern Rock slid 11.5 percent after dipping as much as 16 percent, and adding as much as 14 percent, amid worries it may not pay its interim dividend and a report that a hedge fund break-up could leave investors with almost nothing.
The Financial Times reported Northern Rock has taken legal advice about whether to pay out a 59 million pound ($119 million) dividend to shareholders. "Clearly there has been a huge amount of damage to the underlying brand and the market is in the process of seeing whether any bidder is likely to come forward and what price they'll be prepared to pay - that's why the shares are very volatile," said Barclays' Potts.
The bank has been in crisis since requiring support from the Bank of England earlier this month. Among other banks, Alliance & Leicester lost 2.9 percent. Building and property shares were also hit after Wolseley reported its first profit fall in more than a decade, and warned that weakness in the US housing market was spilling over into repairs and maintenance.
Wolseley fell 5 percent to three-year lows as some analysts cut their profit forecasts for the current financial year by around 10 percent. The stock ended 4.8 percent lower. Taylor Wimpey, Barratt Developments, Persimmon and Hammerson all fell. On Tuesday US consumer confidence and home sales numbers will be watched for further economic indicators, traders said.