INVESTORS were kept on their toes yesterday as battered blue-chip shares fluctuated at the end of another dramatic week in the City.

But there was a brighter end to the week with the FTSE 100 Index closing above the 4000 mark.

By mid-afternoon stocks were hanging on to positive territory after bouncing back from heavy losses earlier in the session.

The turnaround was prompted by a better-than-expected start to trading in New York as the Dow Jones Industrial Average held firm.

As a result, the FTSE 100 Index, which had earlier been down 110 points on fears of another US collapse, was up 23.9 points at 3989.8. It eventually closed up 50.7 at 4016.6.

Analysts said brighter consumer confidence figures in the US had provided the US market with a much-needed lift.

The London market's modest rally added to Thursday's 188-point improvement, which pulled the FTSE 100 Index away from a six-year low after four consecutive sessions on the way down.

Hilary Cook, of Barclays Private Clients, said sentiment was still very fragile but she remained upbeat about the prospects for a rally: "I think the market is on a generally improving trend."

Drug companies lifted the market yesterday, with GlaxoSmithKline up nearly six per cent and AstraZeneca ahead three per cent, as both look to recover lost ground.

The turnaround was also helped by a recovery in heavyweight oil stocks.

But BT Group continued to suffer following its first quarter results announcement earlier in the week and declined another six per cent.