(15:30 UPDATE) An unexpectedly weak reading of US manufacturing in November has erased most of the FTSE's small gains, with the index just a few points ahead at 5870.
Wall Street has opened flat after the ISM survey dipped to 49.5 versus 51.7 in October. Economists attributed much of the weakness to the impact of Hurricane Sandy, as well as fears over a fiscal cliff.
The weak US numbers counter an upbeat report on the Chinese economy (see below).
Positive global manufacturing data cheers FTSE (updated at 13:55)
A round of mostly positive manufacturing surveys from around the world buoyed stock markets with the suggestion that the economic slowdown may be slowing down.
The FTSE 100 followed Asia markets higher, rising 15 points or 0.2% to 5,882 after the latest PMI (purchasing managers index) readings from China, the UK and Europe provided grounds for some optimism ahead of the chancellor's Autumn Statement on Wednesday.
On Wall Street US markets were also tipped to open higher once its PMI figures are released. They are expected to show manufacturing growth slowed slightly in November, which may ease some of the concerns over the looming 'fiscal cliff' deadline.
While that will not be great news in itself it comes in the context of the new figures from China which showed its manufacturing sector returned to growth last month. Its PMI reading hit 50.5 in November, the first time in 13 months it has passed the 50-point level which separates expansion from contraction.
Hirokazu Yuihama, a senior strategist at Daiwa Securities, told Reuters: 'There is growing confidence that China's economy bottomed in July-September, with signs of firmer external demand.'
The eurozone's manufacturing PMI, meanwhile, showed new orders and output declining at a slower rate as it hit 46.2 in November, up from 45.4 in the previous month.
And British manufacturing shrank less than expected with its PMI jumping to 49.1 from 47.3 in October. This was better than most economists had expected.
Rob Dobson, senior economist at Markit, which compiles the PMI surveys, said: 'Purchasing managers have provided the chancellor with some better-than-expected news on the performance of the manufacturing economy ahead of the Autumn Statement. However, the sector is merely stabilising, suggesting that the economy is still showing no signs of rebalancing towards goods production and exports and that manufacturing is unlikely to help prevent a possible slide back into contraction in the fourth quarter.'
On currency markets the pound and the euro responded to the PMIs to make big gains against the dollar. Both sterling and euro rose 0.5% against the greenback to trade at $1.6085 and $1.3059 respectively.
European stock markets advanced too with the Euronext 100 nearly six points or 0.8% higher at 676, encouraged by news that Greece had set a higher-than-expected price for its €10 billion buyback of bonds from foreign lenders.
The encouraging economic news pushed Brent oil futures above $112 a barrell. Gold was 0.12% firmer at $1,716 an ounce.
Melrose (MRON.L), the engineering buyout specialist, led the FTSE 100 higher, up 2.7% or 6p to 219p, followed by IT group Sage (SGE.L), up 8p or 2.5% to 319.6p and investment group Schroders (SDR.L), 41p or 2.5% up at £16.37 after Bank of America Merrill Lynch upgraded the fund manager to ‘buy’ from neutral and raised its target price to £18.50 from £17.50.
Mining stocks dominated the leaders list, with Kazakhmys (KAZ.L), ENRC (ENRC.L), Rio Tinto (RIO.L) and Vedanta Resources (VED.L) rising between 1.4% and 2.1% after the PMI figures from China and elsewhere.
Hargreaves Lansdown (HRGV.L) was the biggest faller, down 2.2% to 740p after a recent rally in the shares in the investment platform.
Polymetal International (POLYP.L) trimmed early gains to trade 0.7% or 7p up at £10.69 after doubling its esimate of the amount of gold in its Albazino mine in eastern Russia.
Cable & Wireless Communications (CWC.L) jumped 1.6p or 4.75% to 36.3p after agreeing to sell its assets in Monaco and island nations to Bahrain Telecommunications in a deal that could be worth as much as $1 billion (£620 million).
Centrica (CNA.L) rose 3.3p or 1% after the Daily Express said the utility was considering returning up to £500 million pounds to shareholders.
After an initial rise Balfour Beatty (BBY.L) dipped half a penny to 257.5p after the infrastructure group said it would continue to invest in its professional services division where it expects to generate 6%-7% profit margins by 2015.
Paragon (PARA.L) advanced 3.6p or 1.5% to 243.8p after the buy-to-let lender confirmed it was in talks to buy Hampshire Trust, a small bank. It could use its banking licence to offer bank and savings accounts.
Sirius Minerals (SXX.L), the £300 million potash miner, rose half a penny or 2.5% to 22.3p on its plans to produce a simpler and cheaper form of the fertiliser ingredient. Liberum Capital repeated its ‘buy’ recommendation with a 43p price target for the shares.
Gem Diamonds (GEMD.L) slipped 1.5p or 0.9% to 160p said it would sell its Ellendale mine in Australia to Goodrich Resources and suspend development of a plant in Lesotho to preserve cash.