Britain's top shares extended their recent rally to a fresh two-year high on Wednesday as mobile phone giant Vodafone was boosted by optimism for an upbeat investor presentation next week after a major bank raised its earnings forecasts, and banks were aided by persistent talk of industry consolidation.
But oil major Shell dipped 2.6 percent after its revamped management failed to win over investors with a key strategy update in the wake of this year's reserves scandal. Dealers said the shares pulled back from a one-year high after Shell said it would spend $45 billion over the next three years on major oil and gas projects and strengthen its finances with $10-$12 billion of asset disposals, but made no specific promises to return more cash to shareholders.
By 1235 GMT the FTSE 100 share index was up 13.6 points, or 0.3 percent, at 4,622.2, after bounding to 4,630.7 in the morning, its highest level since July 2002.
"We had a long period of doom and gloom, but now there's a good feel to it. The market's taken a lot of bad news on the chin with a few profit warnings, and it's come back for more," one dealer said.
A quarter-point rise in US interest rates late on Tuesday had been widely expected, and comments that the world's biggest economy was regaining momentum helped sentiment. Also supportive was news that all nine members of the UK's Monetary Policy Committee voted to leave rates on hold earlier this month, indicating there would be no rush to raise rates next month.
But after a six-week rally some said the FTSE could struggle to go much further. "We've hit a new high for the year but we don't think it's onwards and upwards from here, we think it will remain pretty flat," said Steve Russell, head of research at Ruffer Investment Management.
"It's been a strong rally but we think it's more driven by the need to invest cash rather than any strong, positive view on the market."
Vodafone rose 2 percent after unveiling new-generation phones to lift hopes that sales of new technology products will be good over Christmas, particularly in the key Japanese market.
Dealers said hopes for an upbeat investor briefing by the company on Monday were also lifted by its joint house-broker Goldman Sachs, which lifted its earnings forecasts for this year and the next two years by between 3.2 and 6.6 percent. "These are mainly a result of an upgrade to US revenue and EBITDA margin forecasts, new exchange rate assumptions and increased stock buybacks," analysts said in a research note.
Rival mmO2 firmed 1.9 percent as telecoms added seven points to the FTSE's advance.
Banks contributed the same amount to the FTSE, as dealers said talk of more industry consolidation continued to linger, but with few specifics.
Lloyds TSB and Barclays are seen as the most likely targets for major US banks, while dealers also noted that a German magazine said Deutsche Bank could be interested in an alliance with Lloyds. Lloyds and Barclays both added about 1.5 percent.
Plumbing equipment company Wolseley topped the FTSE leaderboard with a 2.6 percent gain to 920p after UBS raised its price target on the stock to 1,093p from 1,033p.
Hedge fund manager Man Group was the biggest FTSE faller with a 4.6 percent drop after Morgan Stanley downgraded its rating on the stock to "equal-weight" from "overweight". The bank cut its price target on Man's shares to 1,530p from 1,700p and said Man was losing market share.
Mid-cap instrument and controls maker Spectris dipped 6 percent as dealers noted talk of negative feedback on the stock after it held a meeting at ABN AMRO on Tuesday. Neither ABN nor Spectris would comment. Its sector peer Invensys shed 3 percent.
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