The FTSE 100 Index made a late session rally today as fears eased over the US Federal Reserve's unexpected overnight rate hike for emergency bank loans.
London's Footsie closed up 33.1 points at 5358.2 having suffered volatility earlier in the day after the move by the Fed.
But sentiment shifted after Wall Street trading wore on and as investors began to see the rates decision as a sign of strength for the banking sector.
Encouraging US inflation news also helped the market on both sides of the Atlantic, with figures showing that America's rate of inflation barely rose last month, up 0.2%.
The Dow Jones Industrial Average turned an initial 40 point fall into a rise of nearly 20 points within the first few hours.
The Fed's quarter-point rise in the 'discount' rate had caused concern that ordinary US borrowing costs could also be hiked, slowing the recovery in the world's largest economy.
This strengthened the dollar, sending the pound to a nine-month low against the greenback, at $1.54.
Sterling was also knocked by a surprisingly big fall in UK retail sales last month as markets bet the Bank of England could wait for longer before tightening monetary policy.
Among retailers, Tesco fell 2.3p to 427.7p and Argos owner Home Retail Group eased back by 1.7p to 264p after recent rises.
Miners accounted for many of the Footsie's heaviest fallers in the wake of the Fed decision as the strong dollar sent oil prices down to near 78 US dollars a barrel.
Anglo American was the biggest faller, down 44.5p to 2457.5p as disappointment over its decision not to pay a final dividend overshadowed forecast-beating results.
Fresnillo followed not far behind with an 11.5p fall to 774p.
British Airways failed to see much gain despite victory in a court battle with cabin crew.
Shares were 0.9p higher at 210.6p after the workers today lost their High Court bid for a permanent injunction preventing the airline from imposing cost-cutting proposals.
But pharmaceutical firm Shire was enjoying a better session, ahead 60p at 1370p, after it reiterated targets to secure mid-teen revenue growth on average between 2009 and 2015 and reported annual revenues that were ahead of expectations.
In the FTSE 250, pest control to delivery firm Rentokil Initial was rewarded with a 10% or 11.7p rise to 129.7p after it set its sights on "modest" growth and reported good progress on turning around the struggling parts of the business.
Fellow second tier stock Millennium & Copthorne also advanced after the global hotels operator impressed with better than expected results and news that sales growth had returned in the first five weeks of 2010.
Shares rose 11%, or 41.2p to 417.7p.
The biggest Footsie risers were Shire ahead 60p at 1370p, Unilever up 51p at 1947p, British American Tobacco up 55p at 2225p and BT up 2.8p at 118.6p.
The biggest Footsie fallers were Anglo American down 44.5p at 2457.5p, Wolseley off 26p at 1439p, Fresnillo down 11.5p at 774p and Randgold Resources down 66p at 4699p.