The FTSE 100 index has trimmed its gains after publisher Reed Elsevier said it received a court summons over its 2001 accounts, reawakening fears about the reliability of company reporting.
The blue-chip index was last up 47.0 points or 1.1 per cent at 4,439.6, pulling back from a high of 4,471.1 as a recovery from the six-per cent slide in the previous two sessions faltered.
"Sentiment is still at incredibly low levels," said Justin Sandler, an analyst at stockbrokers Eden Group.
"There's a lack of buyers out there. People have been covering short positions on the back of the rally in New York last night but no one is really prepared to take any long positions," he said.
He said the Reed Elsevier announcement gave the market a fright, but that it was hard to take a view on the matter until there was a clear statement from the company.
Shares in the Anglo-Dutch group were down 2.3 per cent in London at 543 pence, compared with 579p before the company said it had received the court summons over its 2001 accounts from a Dutch group that promotes corporate transparency.
Media shares generally hung onto some of their early gains.
Pay-TV firm BSkyB was up 2.1 per cent after news that Britain's Independent Television Commission awarded the licences of collapsed broadcaster ITV Digital to a consortium including BSkyB and the BBC.
The banking sector surrendered some of its early rally, but HSBC was still up 2.5 per cent after Commerzbank and SG Securities both upgraded the stock.
Mortgage bank Northern Rock was 1.5 per cent higher after agreeing to buy insurance group Legal & General's banking businesses for 131 million pounds in cash.
After two days of losses which wiped some 70 billion pounds off the value of leading shares, one of the major sources of strength was mobile phone giant Vodafone, which climbed 5.6 per cent, adding 13 points to the main index.
Elsewhere in the telecoms sector, Cable & Wireless rose 4.3 per cent and mmO2 was 3.7 per cent higher.
Traders said news the Bank of England had left interest rates unchanged at a monthly meeting had supported the market, but business was expected to lack strong direction over the coming sessions with Wall Street closed for the July 4th holiday. US investors are likely to extend the holiday to the weekend.
New York's Dow Jones industrial average wheeled around from a 100-point-plus loss when the FTSE 100 closed on Wednesday to show a closing gain of nearly 50 points.
Some nagging worries remain, however, that anti-U.S. militants might use the Independence Day holiday to mount follow-up attacks to the September 11 assaults.
"You really would have expected our market to behave like this after the way the Street finished last night. The longer that nothing dramatic happens with terrorists or world affairs, the more chance the market might just pull itself together and steady up," said one trader.