Britain's FTSE 100 edged to its highest finish in two weeks on Friday with heavyweight oil companies such as BP pulling the index higher despite sustained worries about global economic growth and interest rates.
The FTSE 100 closed 8 points higher at 5,692.1 points - its strongest closing level since June 7. It finished 1.7 percent higher on the week - ending a run of three weekly losses as investor sentiment improved following a heavy sell-off, which had taken the FTSE down as much as 11 percent from five-year highs in April.
Analysts say sentiment is fragile after the tumble but there are some hopes the tightening US monetary policy cycle is near its peak.
"The markets are worrying again about an economic hard landing and inflationary pressure," said Jeremy Batstone, a research analyst at Charles Stanley. "(But) I think that the very aggressive period of monetary tightening is coming to an end now in the United States."
Strength in oil majors Royal Dutch Shell and BP fuelled the rise after Deutsche Bank issued a bullish call on the sector, dealers said. Royal Dutch Shell added 1.4 percent, and rival BP rose 2 percent.
Traders said Deutsche increased its target prices on a host of European oil companies - including BP - by between 5 and 7 percent. The sector was also supported by buoyant crude oil prices and energy sector take-overs in the United States.
Steelmaker Corus added 5.3 percent as dealers cited vague bid speculation in the stock.
"When you think about it, it is one of the only European steelmakers that has not been bid for yet," said a trader.
Those who fear interest rates might go so high in the United States that they dent economic growth in the world's biggest economy were given more food for thought after new orders for US-made durable goods unexpectedly fell in May.
Some mining stocks closed lower. New FTSE 100 entrant Vedanta lost 2.3 percent and BHP Billiton slipped 0.6 percent.
South African brewer SABMiller fell 1.5 percent after Merrill Lynch pointed out risks to its earnings from weakness in the South African rand.
"In the short-term this may represent a risk to the share price quoted in sterling," Merrill analysts wrote in a research note.
Bus and train firms crowded the list of mid-cap risers after Stagecoach sold its London bus operations to Australia's Macquarie Bank.
"Although we do not expect Macquarie to be able to make further acquisitions in London bus - Stagecoach has a 16 percent market share - we believe the long-awaited arrival of the infrastructure funds into bus will be supportive for sector valuations," UBS said in a broker note.
Shares in Stagecoach closed up 2.8 percent. Rivals Go-Ahead, National Express and FirstGroup each rose strongly.
Shares in Associated British Ports closed 4.3 percent higher after Macquarie said it was considering its position after being beaten in an auction for the ports group by a Goldman Sachs-led consortium, prompting some investors to speculate it will make a counter bid.
"Everyone is thinking they might come back," one trader says.
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