Footsie slips into the red as investors sit on their hands

Royal Bank of Scotland leapt ahead 4 per cent, while Lloyds Banking Group was under the spotlight as it confirmed boss Eric Daniels would forego his annual bonus payment for 2009.

The wider market struggled for direction – closing down 6.10 points at 5352.07 – as investors paused for breath on both sides of the Atlantic following last week's volatility.

The Dow Jones Industrial Average clung to its opening mark, down around 5 points in the first few hours, despite another round of upbeat earnings from firms including Campbell Soup.

London's Footsie started on the front foot after the Nikkei and Hang Seng rose by more than 2 per cent in Asia, as traders decided the US Federal Reserve's move to pull one of its emergency supports for the financial system was an encouraging sign for the US economy.

The Fed's surprise move caused volatility in London on Friday, but a late session reversal helped maintain the recent Footsie rally that has seen it recover more than 300 points since the start of February.

Fed Chairman Ben Bernanke is scheduled to testify on the Fed's rate hike and monetary policy in general before House and Senate committees tomorrow and Thursday.

"The market is still processing a lot of the news on the rate increase.

"It does seems like there's a little concern," said Dennis Cajigas, senior market strategist at Lind-Waldock, a retail brokerage firm in Chicago.

"People are still trying to figure out what the intentions of Bernanke are moving forward," Mr Cajigas added.

Meanwhile, the dollar fell against a number of major currencies yesterday as reports of a rescue for debt-laden Greece lifted the euro and sterling.

The pound was ahead by 0.1 per cent at around the 1.55 dollar mark.

The weaker dollar pushed up the price of oil, which hit a six-week high of more than 80.5 dollars a barrel at one stage.

Among stocks in London, miners benefited from the improved economic sentiment as Eurasian Natural Resources lifted 31p to 1065p and Vedanta Resources cheered 76p to 2630p.

Outsourcing and distribution firm Bunzl was top of the risers' board as annual results showing improved margins and a 6 per cent rise in annual profits meant its shares gained 25p to 678p.

Banks were also among the main share risers, as their bonus plans took centre stage again.

The decision by Lloyds chief executive Mr Daniels sees him follow the lead of bosses at rivals RBS and Barclays in giving up multi-million pound windfalls to appease public concerns.

Lloyds shares advanced by 11/8p to 515/8p, while RBS climbed 11/4p to 353/4p ahead of their results on Friday and Thursday respectively.

Barclays, which last week reported a 92 per cent leap in pre-tax profits to 11.6bn, lifted 4p to 3161/4p.

However, Primark owner Associated British Foods eased back from recent gains – down 3p to 934p – as investors consolidated profits following yesterday's strong trading update that predicted further growth throughout the remainder of the year.

The biggest Footsie risers were Bunzl, Royal Bank of Scotland, Eurasian Natural Resources and Vedanta Resources.

The biggest Footsie fallers were Next down 57p to 1884p, GlaxoSmithKline off 311/2p to 12031/2p, Marks & Spencer down 83/8p to 334p and Thomas Cook off 41/4p to 2367/8p.