The FTSE 100 index of Britain's biggest shares closed in firmer territory on Thursday, with mining and banking shares in the lead, as global stock markets rallied to multi-year highs.
Miners extended the previous session's gains as base metals rallied and after an upbeat report on the sector from Cazenove, which said that fears over a global economic slowdown are overdone, traders said.
The FTSE 100 closed up 35.5 points, or 0.57 percent at 6228.0. Swiss-based miner Xstrata topped the index leaderboard by rising about 6 percent after Morgan Stanley lifted its price target, saying the stock offered exceptional value. Antofagasta, Anglo American and Rio Tinto also rose between 2 and 3 percent.
UK stocks extended the day's gains as an early rally on Wall Street added to momentum, with better-than-expected earnings leading the Dow Jones industrial average to a record high shortly after the opening bell. The S&P 500 touched a six-year high, and the Nasdaq rose more than 1 percent. Asian stocks had also rallied, with the Nikkei reaching its highest close in more than seven months.
"We're being dragged up by other indexes, rather than by the strength of the UK," said Neil Parker, a market strategist at Royal Bank of Scotland. "The Nikkei was up strongly overnight, and the Dow Jones has started very strongly as well. It's those increasing indices that are dragging up the FTSE 100 as much as its domestic-built sentiment."
Banks were among the main gainers, with HBOS rising more than 2 percent after saying it should exceed 2006 earnings expectations due to strong revenue growth and tight cost controls and that it would extend its share buyback programme into 2007.
Alliance & Leicester was up 1 percent, but Royal Bank of Scotland shed 1 percent after the bank dismissed a report in The Scotsman newspaper on Wednesday that it was considering a major acquisition in the United States early next year.
Royal Dutch Shell added 0.5 percent as US crude oil prices gained more than a dollar after Opec decided to cut its output by 2 percent from February.
But oil major BP dropped 0.7 percent on negative broker comment, traders said, and after saying on Wednesday that US regulators recommended civil action against the firm for alleged manipulation of gasoline futures trading in 2002.
British oil company Cairn Energy was the day's standout loser, dropping more than 4 percent on worries that demand for the initial public offering of Cairn India would be hit by recent weakness on the Indian stock market, analysts said.
The company does not benefit immediately from the stronger oil price, because some of its planned oil production will not be until 2009 and 2010, one analyst added.
Property companies gained after Nationwide, a leading mortgage lender, forecast house price inflation in Britain at 7 percent in 2007, mainly driven by strong gains in London property prices. Shares in Land Securities and British Land rose more than 1 percent, while shares in Hammerson rose 0.7 percent.
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