Oil keeps the market on an even keel

The benchmark FTSE 100 closed down just 0.63 of a point at 5,396.48 following its near-3 per cent gain on Monday to a three-month closing high.

CMC Markets analyst Michael Hewson said: "While earnings continue to come in on the positive side, economic data continues to disappoint and this makes it inviting to book profits in the short term."

Light volumes accentuated share price moves as investors took off on their summer holidays, with the Footsie trading at just 70 per cent of its 90-day average volume.

America's Dow Jones industrial average also saw choppy early trading following overnight gains as some of the latest results from the likes of Procter & Gamble disappointed. Flat US consumer spending in June and lower-than-expected factory orders added to economic nerves.

The pound held its ground above $1.59 against the dollar, and traded at €1.20 against the euro.

In London, many banks gave back some of their gains, but the slack was taken up by insurers after an improvement of 1 per cent for Prudential and Standard Life. Sentiment has been boosted by forecasts of higher first-half earnings from the sector this month.

Under-fire Prudential, which is expected to make its peace with investors by increasing its dividend, rose 5.5p to 572p, while Standard Life added 3.1p to 212.3p.

Aviva was also in the spotlight after it signed a five-year agreement with Santander for the distribution of its life protection products from next June. Shares - helped by a broker upgrade - put on 3.6p at 376.5p.

Energy stocks were closely watched after the price of oil remained above $80 a barrel, triggering a rise of 14p to 1,764.5p for Royal Dutch Shell. BP, which is preparing for its "static kill" operation to permanently seal its ruptured well in the Gulf of Mexico, added 2.55p to 415.65p.

In the FTSE 250, shares in housebuilder Taylor Wimpey jumped 9 per cent or 2.6p to 31.1p after it reported a return to profit at the half-year stage and said net debt had fallen below 1 billion to 633.9 million.

While the company stressed that it still faced uncertain economic conditions, the performance triggered a rise for Barratt Developments, up 2.3p to 103.5p. They were joined by automotive and aerospace firm GKN, which climbed 7.5p to 144.1p after it restored its dividend, moved back into the black and said its strong market positions boosted confidence.

There was no such rally for ITV shares, despite reporting a profit for the first six months of the year. It warned that a continuation of the recent rebound in advertising revenues was far from certain in 2011, offsetting chief executive Adam Crozier's five-year turnaround plan for the broadcaster.

Shares fell 2p to 51.6p, a drop of nearly 4 per cent.

Among the banks, Lloyds dipped 0.52p to 71.92p while Royal Bank of Scotland gave up 0.05p at 52.05p.