An equity market that has become harder to read than Ulysses continued its volatile run before finally ending up on the day.

The FTSE 100 index was on a knife edge for much of the day as an abundance of liquidity and some inflationary data battled with encouraging currency moves, strong corporate results and overseas recoveries.

However, after swinging around throughout the session, Footsie closed 8.3 up at 5,844.1. The FTSE 250 index, however, was dogged by weakness in the building sector and fell 28.5 at 5,448.5 while the SmallCap fell 29.6 to 2,460.3.

Initially, the ground was prepared for the seventh losing day in succession. Late on Tuesday, just when it seemed that a cumulative 350-point fall might have encouraged some of the less timid investors to dip back into the market, Scottish Widows, the investment fund, offloaded more than £400 million sterling worth of stock.

Although the portfolio adjustment was not large in relation to the group's £31 billion under management, it did remove much of the emergent appetite for stock.

Coincidentally, the US market fell sharply and futures contracts were later implying a sharp downturn first thing yesterday.

After the first 10 minutes of trading, Footsie was off more than 50 points and trading 6.5 per cent down from its intra-day peak achieved at the beginning of last week.

The latest consumer credit data showed that borrowing remained strong and was still exerting its inflationary pressure on the economy. Credit growth in June was £1.28 billion, which matched the previous month's figure and was above the consensus forecast of £1.1 billion.

Nevertheless, the growth was at odds with a persistent drip-feed of figures that has suggested the economy is slowing down.

Strategists at Royal Bank of Scotland suggested: "There may be distress borrowing involved in this, or consumers could be switching from cash to credit transactions as the economy slows."

In any case, the impact of the figures faded and the market focused instead on Tuesday's sharp retreat in sterling, which provided sorely needed relief for exporters and international traders.

Investors also took a more confident view on interest rates ahead of the Bank of England's monetary policy committee meeting next week.

Perceptions that the bank might hang fire on rates because of a slump in business confidence gave a boost to the banking sector, which represents 20 per cent of Footsie by market valuation. Mortgage lender Abbey National, which was the first of the big lenders to report interim figures, led the way upwards.

Footsie moved into positive territory and then dipped back below its opening level, with some pressure from a sharp share price fall in Misys, the leading index's only IT stock.

Finally, in the last few minutes of trading, the index shrugged off its depression to close up on the day.

Volume by 6 p.m. was 791.5 million shares with activity weighted towards the non-Footsie stocks.