Britain's top shares rose on Friday, led by banks on positive US economic data and as immediate fears over the Greek debt situation subsided. The index posted its best weekly percentage gain in almost a year, up 5.1 percent, in a period, which saw Greece approve an austerity plan that will pave the way to a tranche of new bailout money.
However, the index's progress could be hampered as investors perceive the eurozone debt crisis is not over yet. The market welcomed upbeat US data, which alleviated some of the recent worries over the economy, with a forecast-beating ISM manufacturing survey building on Thursday's surprisingly strong regional business data.
Miners, which spent much of the session in negative territory after weak data from top consumer China, came back into favour as the upbeat US data triggered an improvement in investor risk appetite. Eurasian Natural Resources was among the best off, up 2.4 percent, while Antofagasta added 1.9 percent. Randgold Resources bucked the stronger sector trend, off 1.5 percent and the heaviest faller in the FTSE 100, as traders cited a downbeat note from Morgan Stanley in which the broker started coverage on the precious metals miner with an "underweight" rating.
Buyers came in for risk-sensitive banks as the Greece fears receded, with Lloyds Banking Group, Barclays and Royal Bank of Scotland clustered towards the top of the blue chip leaderboard, up as much as 3.7 percent. Interdealer broker ICAP, the subject of vague bid talk this week, was the star performer, ahead 5.1 percent. Analysts said the stock should benefit indirectly from greater clarity on Greece as market volume is likely to pick up and drive revenue.
The UK benchmark index advanced 44.05 points, or 0.7 percent, to 5,989.76, gaining for its sixth day in succession. "People are relieved that the Greek situation is seemingly contained for the next couple of months. Also the most recent economic news out of the US has not been as bad as feared," said Lex van Dam, hedge fund manager at Hampstead Capital, which has about $500 million of assets under management. "I still think the sovereign debt situation in Europe will not go away and that strength should be sold. A neutral position over the summer seems prudent."
Traders also cited the second-quarter US earnings season, which unofficially kicks off when Alcoa posts its numbers on July 11, as having the potential to knock major indexes, with expectations running high. "The market's been doing fairly well, but it's difficult to see whether it will continue or not because we've got US corporate earnings coming up, and the question people will ask is, 'Have we hit a top in the earnings cycle?'," Manoj Ladwa, senior trader at ETX Capital, said.
"If we start to see disappointing numbers, it could be that we'll see disappointing numbers for a couple of quarters at least, so it could be a catalyst for the market to come back down." On the FTSE 250, defence firm QinetiQ climbed 7 percent as traders pointed to talk of a possible take-over approach for the UK defence technology firm from British arms maker BAE Systems, or a US bidder.
"BAE is looking to acquire cyber security and services assets and there is an element of both to QinetiQ," said Edison analyst Roger Johnston. "It would be a leftfield move from BAE in my opinion, given the likely conflict of interest between some of QinetiQ's businesses, which serve rivals to BAE."
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