The UK's index of 100 leading shares pared losses in choppy trade to end yesterday's session flat as rising US stocks soothed a market fretting over interest rates.
The FTSE outperformed other European markets to closing unchanged at 6,505.1, helped by oil stocks.
Royal Dutch Shell rose 0.8 per cent after Merrill Lynch upgraded it to buy from neutral, which buoyed the rest of the sector. BP gained 0.2 per cent.
UK stocks were lower earlier in the session after four days of losses, along with other European bourses, as fears of further monetary tightening drove US benchmark Treasury yields above 5.25 per cent.
"The FTSE has regained a little bit of territory as 10-year bond yields have actually come back from the worst that they hit this morning," said Philip Isherwood, strategist Dresdner Kleinwort Wasserstein.
US Treasury yields were last up at 5.15 per cent, but off the day's high of 5.252 per cent. US stocks edged higher as gains in interest-rate sensitive shares such as utilities helped bring stability to the market.
Also underpinning the market, shares in RBS rose 1.5 per cent as Barclays' President Bob Diamond said his company was confident of beating RBS to their disputed takeover prize, Dutch bank ABN AMRO. "I think a lot of traders are thinking that in that case Royal Bank won't be spending out a load of money on the takeover," says one trader.
"If Barclays is going to push it all the way, then it may be that Royal Bank doesn't get caught up into overpaying for ABN."
Barclays fell 0.5 per cent. Barclays has agreed an all-share takeover of ABN worth about €63 billion, but a consortium led by RBS has made a mostly cash offer worth €71 billion.
Elsewhere in the banking sector, Lloyds TSB Group said it had made a strong start to 2007 and expected profit to rise at least 10 per cent in the first half of the year. Even so, its shares were down 0.3 per cent.
Britain's largest retailer Tesco Plc made a £155.6 million agreed offer for Dobbies Garden Centres yesterday, its first move into the gardening market. Shares in Tesco were up 0.7 per cent.
Cable & Wireless went up 0.2 per cent after Credit Suisse raised its price target.
On the downside, miners took more than three points off the index on the back of ailing copper prices. Vedanta dropped 2.5 per cent, and BHP Billiton shed 1.4 per cent. But Lonmin bucked the trend, up 1.9 per cent, with traders citing a resurfacing of bid speculation.
Britain's Rexam, the world's biggest can maker, said it was in talk about buying the plastics division of US packaging company Owens-Illinois Inc.
It was the biggest loser of the index, falling 2.8 per cent, also hit by an investment rating downgrade from Seymour Pierce.