Britain's FTSE edges higher on hopes of weekend Cyprus deal

Defensive sectors such as telecoms and pharmaceuticals led gainers, as investors were unwilling to place bets on more risky sectors while a deal was yet to be finalised.

Banks fell by as much as 1.2 percent in morning trade, led by those with significant exposure to the euro zone, such as Royal Bank of Scotland and Lloyds.

However, they staged a partial recovery to trade down just 0.2 percent after news that Cyprus had agreed to spin off Greek units of its banks to Greece.

They weakened again as it became clear that a final deal would not be struck during trading hours. However, traders were reluctant to spark a sell-off, wary of the potential for a substantially higher open - or "bullish gap" - on Monday, should the crisis be resolved over the weekend.

"After last weekend's rather cackhanded bailout plan, we gapped lower, and the fear is that if we come to a new bailout agreement, we'll gap higher. So no one really wants to be caught short," Michael Hewson, senior market analyst at CMC Markets, said.

"But while a resolution may well assuage fears of a massive sell-off, overall Europe's underlying problems are still there."

The FTSE 100 index closed up 4.21 points, or 0.1 percent at 6,392.76 points, although the turmoil in Cyprus saw the index snap a 5-week winning streak despite the

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