The FTSE struggled to keep its head above water and maintain its recent upward trend this morning, while UK house process fell for the second consecutive month.

After taking a bigger drop on opening, the FTSE managed to claw back earlier losses and was a shade less than 3 points off at 10.30am (London time) to reach 5363.83.

Market sentiment was somewhat dour as building society Nationwide announced that UK house prices fell 0.9% in August, faster than July’s decline of 0.5%. Although analysts are confident that more sellers are returning to the market, there is concern that the housing market is out of proportion with the rest of the economy and that many first-time buyers are being discouraged by high deposit requirements.

Looking at the FTSE 100, the morning's big winners included technology firm Autonomy Corporation, which rose 4.60% to 1706p over takeover conjecture involving more than one US technology company. BAE systems also fared well, adding 2.32% to 309p after the announcement of a new military vehicle contract with the US government worth $629 million. [1] Also among the day's early leaders were Old Mutual, which added 1.82% to climb to 134.10p, International Power, up 1.51% at 384.20p and BG Group, gaining 1.48% at 1094p.

Things were not so rosy for ARM Holdings which saw its price slip 3.72% to 360.20p , Cable and Wireless, which lost 2.71% at 70p and African Barrick Gold which shed 2.27% at 603.5p. 3i Group lost 1.33% at 266.4p while food retail giant Tesco saw its share price drop to 411.2p (-1.13%).

By 11am (London time) the index had risen 0.10% to 5371.67- tomorrow’s all important US non-farm payroll data will go some way to dictating whether it ends the week positively.

There were more positive signs of recovery on the continent with official eurozone figures showing a 1% expansion between April and June – putting Europe ahead of the US in the recovery stakes. Germany in particular helped fuel this advance, with growth of 2.2%. At the same time, France saw its unemployment rate drop for the first time since the recession started. In the three months to March, the number of jobless decreased from 9.9% to 9.7%.

In spite of these positive signs from Europe’s largest economies, the expectation is that ECB policy-makers will extend emergency lending measures until they are more confident about the extent of global recovery – their decision is due at 1.45pm this afternoon.