A PROFITS warning from GlaxoSmithKline curtailed a rally for the FTSE 100 Index as shares in the pharmaceuticals giant slid by nearly five per cent.

The FTSE 100 Index finished 2.8 points higher at 6798.1, having earlier made headway on the back of gains for Vodafone and outsourcing firm Capita.

Markets have recovered in recent sessions on signs of an easing in tensions between Russia and the West over the downing of a passenger jet in Ukraine.

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The pound slipped against the dollar, at 1.70, and held steady against the euro, at 1.27, after the latest minutes from the Bank of England showed that low wage growth prevented members from considering a first rates hike in five years.

GlaxoSmithKline declined almost 73.5p to 1481.5p after it reported a 22 per cent decline in half-year operating profits to £2.94 billion and warned that earnings per share in 2014 were now likely to be flat this year.

Shares slumped on the downgrade as the company also highlighted the impact of the stronger pound on prospects for its share buy-back programme. The company's performance continues to be hit by falling drug and vaccine sales in the United States, driven by competition from generic products.

Vodafone did its best to prop up the London market after former US partner Verizon reported a bigger-than-expected surge in second quarter revenues as it benefits from strong demand from wireless customers.

The UK mobile phone giant, due to present its own figures tomorrow, rose by 1.3p to 197p.

Outsourcing firm Capita set the pace at the top of the FTSE 100 Index after it achieved a 16 per cent rise in half-year underlying profits to £238 million. It said it secured £1.3 billion of major contract wins in the six-month period, while revenues improved 13.9 per cent to £2.1 billion.

The update prompted Investec to upgrade its rating on the stock from hold to add and caused shares to surge by almost five per cent or 55p to 1210p.

Outside the top flight, regional airline Flybe lost initial gains seen after chief executive Saad Hammad highlighted further progress in the company's turnaround. The stock was up by three per cent at one stage but later closed a penny lower at 117p.

Renishaw set the pace in the FTSE 250 Index as the precision engineering firm reported record annual revenues of £355.5 million and better-than-expected profits of £70.1 million. Shares jumped almost 23 per cent or 331p to 1801p.

The biggest risers on the FTSE 100 Index were Capita up 55p at 1210p, Rio Tinto up 54p at 3391p, Associated British Foods up 43p at 2874p and Marks & Spencer up 6.7p at 449.3p.

The biggest fallers on the FTSE 100 Index were GlaxoSmithKline down 73.5p at 1481.5p, SSE down 43p at 1498p, Hargreaves Landsdown down 20p at 1072p and Mondi down 17p at 1034p.