By Sarah Turner

LONDON (Dow Jones)--London shares rebounded from early losses Tuesday, closing in positive territory as worries about North Korea's nuclear weapon test faded and Wall Street made a push into positive territory.

The U.K. FTSE 100 index rose 1.1%, or 46.43 points, to close at 4,411.72, as investors returned from a long holiday weekend.

Shares on the Continent also erased early losses.

In New York, U.S. stocks surged, with a sharp rise in consumer confidence outweighing a further fall in house prices.

The FTSE fell in early trading, dragged down by mining companies after Rio Tinto agreed to take a cut in iron-ore prices from Japan's Nippon Steel Corp., but then reversed early declines.

"The price cut ... has done little to help the miners while also serving up a stark reminder as to the state of the global economy, but perhaps more interesting has been the fact the U.S. isn't looking that panicked by the North Korean missile launches that followed the underground atomic tests over the weekend, instead finding strength off numbers such as the better-than-expected consumer confidence reading," said Jimmy Yates, head of equities at CMC Markets, in a market brief.

Rio Tinto (RTP) trimmed early losses to close 0.6% lower.

Other mineral extractors reversed early losses, with BHP Billiton (BHP) shares up 1.4% and shares of Xstrata up 0.9%.

Bank shares remained weak, with Lloyds Banking Group (LYG) shares off 2.6% and Royal Bank of Scotland down 1.7%.

"We're seeing the [recent] upward movement in financials and cyclicals unwind somewhat. I think there's probably more to come," said Edmund Shing, strategist at BNP Paribas.

Shares of Cable & Wireless fell 2%.

The telecom was downgraded to underperform from neutral at Credit Suisse, with the broker noting recent results and guidance from the company were below expectations.

Outside the top index, shares of Cosalt , which makes safety equipment for the oil and gas industry, fell 20.8%.

Trading in February and March was below expectations, the firm said. It now expects fiscal-year trading to fall short of market forecasts.

"It is becoming clear that the improvements we are now experiencing may not be sufficient to make up for the earlier weaknesses in full," it said.

Shares of financial-derivatives-trading firm IG Group declined 4.4%.

The company noted recent speculation regarding the possibility that the Financial Services Agency of Japan may shortly introduce rules to limit the amount of leverage that can be offered to retail foreign-exchange speculators in Japan.

IG Group said that the proposed methodology to limit leverage would apply only to a minority of its Japanese clients and that it would not expect these changes to materially affect revenue or profit.

Services Desk; Dow Jones Newswires; +44-20-7842-9319/9274