The blue-chip FTSE 100 index finished up 0.2%, with industrial stocks and defensive plays rising as investors bet on them benefiting the most from an economic reopening once the coronavirus pandemic recedes.

Mining stocks, including Rio Tinto, Anglo American and BHP, were among the biggest laggards, falling between 2.4% and 4.4%. [MET/L]

"Yesterday the market had huge gains. It's hard for the market to maintain explosive gains without a good reason and arguably today they don't have a good one and there is a bit of caution around the bond yield issue," said Connor Campbell, analyst at Spreadex.

"The strong start of the week can be undone, especially as the week goes on as we have U.S. inflation numbers and ECB monetary policy statement on focus, which potentially is going to cause the bond yield issue to come to the forefront once again."

A raft of global stimulus measures and optimism around vaccine rollouts have helped the FTSE 100 rebound more than 37% from a coronavirus-driven crash last year, but investors are cautious after Bank of England governor Andrew Bailey expressed concerns on Monday about a possible rise in inflation.

British consumers cut back heavily on spending as they weathered a second month in a COVID-19 lockdown in February, but confidence in the economy hit a 12-month high, payment card firm Barclaycard said.

The domestically focused mid-cap FTSE 250 index rose 0.8%, led by industrials and consumer discretionary stocks.

The world's largest inter-dealer broker, TP ICAP Plc, fell 5.3% after it halved its dividend citing a one-off reduction, and said first-quarter revenue might be lower compared to 2020.

Office space provider IWG tumbled 4.4%, after saying it will shut more underperforming centres as the market recovery from the pandemic is taking longer than anticipated.

(Reporting by Shivani Kumaresan and Amal S in Bengaluru; Editing by Rashmi Aich and Mark Heinrich)

By Shivani Kumaresan and Amal S