THERE was a much more confident feeling around European stock markets yesterday, especially in London, where share prices just about managed to close in the black after five consecutive sessions of losses.

But it was a close run thing, with Wall Street once again demonstrating its erratic nature and ability to shock, falling over 30 points early in the US trading session, before stabilising and moving ahead shortly after London closed.

The FTSE 100 index settled a net 0.8 higher at 3,640.3, having lost 136 points over the previous five trading days, mirroring the big slide on Wall Street.

The British market's second liners continued to demonstrate their resilience, with the FTSE Mid 250 index moving up 7.2 to 4,229.9.

Further convincing evidence that there are, as yet, few signs of emerging inflationary pressures helped lift the gilt market which, in turn, imparted growing confidence to equities.

A rise in British unemployment, plus what were seen as encouraging average earnings numbers and unit wage costs, drove gilts sharply better in the morning, although the day's best levels were quickly lost as bonds delivered another erratic performance.

The market has recently been dominated by the "big picture" led stories, so it was refreshing to see numerous individual stories take over the running.

The bank sector remained in the forefront of activity, with most of the individual stocks staging a recovery after the big losses of recent sessions. These were triggered by substantial weakness in global bond markets and, to a lesser extent, by worries about the intensification of the mortgage price war in Britain.

The sector provided yesterday's best individual Footsie performer in Standard Chartered - the bank's shares posted a near 4 per cent gain - and the third worst performer in HSBC, which dipped 2 per cent.

Both shares have been hounded by sellers worried about the impact of the recent heightened tension in the Far East after China's military manoeuvres off the coast of Taiwan.

BP, one of the British market's star performers in the past two years, moved into top gear and the shares approached their all time record after the company painted a bullish picture of prospects during a meeting with oil sector analysts. Some oil specialists warned, however, that much of the good news has already been factored into the price.

Turnover in equities reached 738.8 million at the 6 p.m. reading.