An encouraging speech from Federal Reserve Chairman Ben Bernanke last night, domestic takeover news and an unexpected rise in UK retail sales helped the FTSE 100 break into positive ground at the open.

Federal Reserve Chairman Ben Bernanke last night tried to appease concerns about the global economy, saying things aren’t as bad as they seem and the US economy should avoid a double dip recession. His comments helped calm Asian equity markets and provided the FTSE 100 with a minor boost at the start.

Equity market sentiment was also helped by an encouraging report from the British Retail Consortium, which showed sales at stores open at least 12 months rising 0.8% from a year earlier compared with a 2.3% decline in April. Takeover news also lifted the FTSE at the open, with Chloride Group rallying 17.8% to 340p following the surprise 325p-a-share bid from Swiss engineering group ABB. Investors are now speculating that America's Emerson Electric will make a counter bid for the UK company.

Upside momentum was weak, however, and the blue-chip index later pared all of its gains. The reaction suggests that investors are taking the opportunity to reduce their exposure to equities even on the back of minor gains. Sentiment was also tainted by credit rating agency Fitch, which warned that the UK's fiscal challenge is 'formidable' and warrants a strong medium term consolidation strategy.

By 10.15am (London time) the FTSE 100 Index was trading at 5007.59, representing a 61.47-point (-1.21%) decline, while the broader FTSE 250 Index retreated 81.39 points (-0.86%) to 9396.31.

Banks were among the worst performers on the blue-chip index this morning, with the likes of Barclays, Lloyds Banking Group and Royal Bank of Scotland falling 3% on fears about a domestic banking sector levy and ongoing eurozone debt concerns.

Tesco was another major faller, down 2.5% to 396.9p on news that chief executive Sir Terry Leahy will retire next year. Sir Leahy will be replaced by International chief Philip Clarke. Bucking the negative trend was Aggreko, however, which jumped 2.8% to 1392p following better-than-expected full-year profit projections.