UK stocks closed at their highest level in nearly two weeks on Monday as numbers from Vodafone boosted investor confidence at the start of a busy earnings week and concerns over the conflict in Lebanon eased slightly.
Strong earnings from US drug companies pushed Wall Street higher, supporting European gains, and lower oil prices added a further prop, having hit record levels earlier this month on fears fighting between Israel and Hizbollah could spread.
"We have obviously been bolstered by some decent earnings numbers," said Investec UK strategist Roger Cursley. "The market wanted to rally and has proved very resilient in the last few weeks, considering what has happened to the oil price."
"There was so much geopolitical fear in the oil price already, given the tensions between Iran and the US The one thing that would make markets very nervous is if the action in Lebanon spreads ... but it does seem to be fairly contained."
The FTSE 100 share index closed 114.2 points, or 2 percent, higher at 5,833.9 points - its strongest finish since July 12. Only four stocks ended in the red.
Shares in mobile phone firm Vodafone gained 3.6 percent, adding almost 10 points to FTSE gains, after the company said it added a net 4.5 million new customers in its fiscal first quarter and kept its annual forecasts for revenue growth and profit margins.
"We continue to view Vodafone as undervalued, given its ability to realise asset value, particularly in the US, but also in Belgium and Switzerland," said Morgan Stanley analysts in a research note.
"Were these disposals made, Vodafone would have scope to increase dividends by 50 percent and still have a lower payout ratio of underlying earnings than BT."
Online gaming firm PartyGaming saw the best gains, leaping 8 percent, with dealers citing upbeat broker reaction to the company's 49-percent increase in second-quarter revenues as reported on Friday.
Pharmaceuticals boosted the FTSE, with AstraZeneca Plc shares up 3.8 percent to a four-year high after it won US approval for two-in-one asthma drug Symbicort a year earlier than most analysts had expected.
The sector was also bolstered by better-than-expected numbers from US peers Merck & Co and Schering-Plough Corp. The financial sector contributed most to the FTSE's rise, with banks adding more than 25 points and shares in the world's largest money and derivatives broker ICAP - which had been tipped as a stock to buy by weekend media - up 5.9 percent.
Money management firm Amvescap rose 4.9 percent as it said it expected the acquisition of buyout firm WL Ross & Co to boost earnings immediately. Britain's biggest spread-betting company, mid-cap IG Group, rose 6.4 percent after posting a 51 percent rise in core profit. But some oil and gas stocks struggled to keep up, as oil prices eased on renewed diplomatic efforts to resolve conflict in the Middle East. Crude traded under $74 a barrel, off record highs above $78.
BG Group Plc ended down 2 percent as the easing oil prices countered the effect of upbeat results, dealers said. The UK gas explorer had reported a 46-percent jump in second-quarter net profit. Back among the mid-caps, Whitbread rose more than 6 percent following a weekend newspaper report that US real estate investment company Starwood Capital was in talks with advisers to launch a bid worth around 3 billion pounds for the leisure group.
On the downside, shares in GCap Media Plc fell 7.5 percent after Britain's biggest commercial radio broadcaster said the advertising market had been weaker than expected and trading looked set to remain tough.
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