The FTSE 100 ended 20.15 points higher at 5,131.99, recovering from a session low of 5,105.30 in the afternoon but still well below the morning peak of 5,181.21.
“Those who live by the sword die by the sword, and a weak start for Wall Street saw the FTSE’s gains decimated with astonishing speed as the US.market opened heavily down,” said David Jones, chief market strategist at IG Index.
US blue chips had recovered by London’s close, but still were down 0.3 per cent after Federal Reserve chairman Ben Bernanke said he could begin pulling back stimulus from the economy by first removing cash from the financial system.
Analysts described his remarks as “hawkish”, suggesting the US economy is on a stable path to recovery and the dollar was lifted by such hopes.
But commodity prices dropped back on dollar strengthening, reversing earlier gains by heavyweight miners.
Antofagasta, Xstrata, Anglo American, and Kazakhmys shed 1.2 to 2.1 per cent.
BHP Billiton fell 1.5 per cent after it posted its weakest first-half profit in four years and signalled caution over a sustained global recovery.
Rio Tinto, which reports results on Thursday, fell 1.3 per cent. China has indicted four Rio employees on charges of bribery and violating commercial secrets.
The energy sector slipped back with the crude price also hurt by the firmer dollar. BP managed to add 1.0 per cent but Royal Dutch Shell dropped 1.6 per cent as the stock traded ex-dividend.
GlaxoSmithKline and household goods firm Unilever also both traded ex-dividend. Including Shell, the three stocks took 10.99 points off the blue chip index.
Autonomy was the top blue chip faller, losing 5.5 per cent after the software firm announced a £500m ($779m) convertible bond to be used for acquisitions and said it was buying one of its resellers, Micro Link.
Financial issues provided the main support for blue chips as hopes gathered that a solution could soon be found to euro zone debt issues.
European Union leaders will hold a special summit on the economy on Thursday with some announcement expected to be made, although sentiment was mixed on whether a deal over Greek debt could be done.
Banks, under pressure over their exposure to euro zone debt problems, moved higher.
Lloyds Banking Group, Barclays, Royal Bank of Scotland, HSBC, and Standard Chartered were up 1.2 to 3.7 per cent.
RBS said it believes Lloyds and Barclays, in the UK, stand out “as the biggest beneficiaries of a market rebound based on recent share price declines and implied cost of equity in current valuations.”