The FTSE 100 almost breached the 6000 mark on another day of thin trading in London.
The blue-chip index surged to 5997.09 a 17-month high following the release of fresh data showing a recovery in profits at Chinese industrial businesses.
However, by lunchtime the FTSE 100 (FTSE: ^FTSE - news) was heading south after Harry Reid, the US Senate majority leader, stoked fears that US politicians will fail to reach an agreement on America's "fiscal cliff" a package of spending cuts and tax rises ahead of the New Year, which could push the global economy back into recession.
Hopes of a deal were dealt a blow when Senator Reid was reported as saying "nothing's happening" in budget talks between President Barack Obama and Congress.
As a result, the FTSE 100 gave up almost all of its morning gains, closing up just 0.12 points at 5954.30, as the Dow Jones Industrial Index fell. Volumes were light, with just 153m shares changing hands. The FTSE 250 also managed to just edge up 1.88 points to 12397.68.
Mining companies peppered the blue-chip leaderboard after annual profit growth at China's industrial companies jumped 22.8pc in November (Xetra: A0Z24E - news) . The data prompted a rally in the copper price, which rose to a one-week high in London, boosting producers of the metal. Antofagasta (Other OTC: ANFGY - news) perked up 16p to £13.51 and Eurasian Natural Resources Corporation rose 10.2 to 289.4p.
Steel company Evraz , in which Chelsea Football Club owner Roman Abramovich has a stake, was another strong performer. The Russian mining group added 5.1 to 259.4p after it said it had gained merger clearance from the Russian Federal Anti-monopoly Service in regards to it taking a stake in coal company OJSC Raspadskaya.
On a less positive tack, Randgold Resources finished in negative territory as the company cut its guidance for output at its Tongon mine in the Ivory Coast after a fire at a processing plant. The gold miner now expects full-year production of about 208,000 ounces, compared with analysts' expectations of 230,000 ounces. The shares dipped 30p to £60.90.
Defensive stocks were generally out of favour despite the market's jitters about the possibility of recession as a result of failure to reach a deal over the US fiscal cliff. Pharmaceutical company Shire (LSE: SHP.L - news) dropped 22p to £18.96 and water utility Severn Trent (NasdaqCM: STRN - news) lost 18p to £15.96.
Among the smaller companies, Russian gold mining company Petropavlovsk rose 6.4 to 359.1p on rumours of a talk of takeover bid.
Gulf Keystone Petroleum jumped 12¾ almost 8pc to 176¾p. One trader suggested the gain could be down to rumours that the High Court is about to throw out a legal claim by Excalibur Ventures that it is entitled to as much as 30pc in Gulf Keystone's assets in the Kurdistan region of northern Iraq. The case began in October and is due to reach a conclusion in January.
AquaBounty Technologies continued to perform well, with the shares gaining 2.6 to 18.1p. The company makes genetically engineered salmon and several days ago AquaBounty was given a major boost after the US Food and Drug Administration (FDA) said in a draft environmental assessment that the biotech salmon was not likely to be harmful. However, the FDA said it would take comments from the public on its report for 60 days before making a final decision on approval.