The FTSE 100 opened lower but bounced back in early trading, gaining ten points to reach 4,118.51 by 08:20 GMT.
Royal Bank of Scotland began a recovery after last night's plunge and shares were worth 13.10p by 08:10, 16.38 per cent higher than yesterday's close.
Standard Chartered also rose on the index, climbing 5.31 per cent by 08:07 GMT, while publisher Pearson rose 4.52 per cent on higher profit expectations.
Defensive stocks, including pharmaceuticals and utilities were also higher.
Mining stocks were still in the red, with Kazakhmys down 6.56 per cent, Eurasian Natural Resources falling 4.14 per cent and Xstrata trading 2.63 per cent lower.
In the US, the Dow Jones closed 0.84 per cent higher, ahead of today's inauguration of the 44th president, Barack Obama.
However, stocks across Asia dived on fears for the global financial sector. Japan's Nikkei 225 fell 2.31 per cent, while Hong Kong's Hang Seng index dropped 2.6 per cent.
Investors will be eyeing UK inflation figures, due out at 09:30 GMT, which are expected to show a sharp fall in the consumer price index.
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