Britain's top index of 100 leading shares rose more than 1 percent on Thursday as a retreat in US bond yields improved sentiment for stocks and as UK oil shares gained. The FTSE closed 1.4 percent higher at 6,649.9, with oil responsible for nearly a quarter of that increase.
BP rose 1.5 percent and Royal Dutch Shell 2.7 percent as oil prices rose above $70 a barrel on rising tensions in the Middle East and supply concerns in the United States. Bradford & Bingley, Britain's biggest provider of mortgages, was the best performer with a 5.8 percent gain after Credit Suisse raised its rating on the stock.
But the biggest contributor to the momentum, analysts said, was a retreat in bond yields in the United States, where depressed bond prices lured buyers back into the market. "Generally speaking, share prices have got the bit between their teeth again, but I think we need to be a little bit careful before we can honestly say that we are over this little bump in the road we saw last week," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.
"I think that today was a day characterised by the knock-on effect of short-covering in the US Treasury markets." US bond yields had risen to five-year highs in the previous session as losses in bonds, on the perception that global interest rates are headed higher, gave way to heavy mortgage-related technical selling.
Centrica was also among top performers, up 4.5 percent after Citigroup upgraded Britain's biggest domestic energy supplier stock to "buy" from "hold". International Power rose 1.6 percent on talk that France's EDF may be looking to make a bid for the UK-based power generator. Officials at International Power could not immediately be reached for comment.
Miners contributed more than 11 points to the index on the back of firmer prices and in a generally upbeat session for stocks. BHP Billiton rose 2.4 percent, and Antofagasta rose 2.4 percent. Rio Tinto was up 3.2 percent after it reached an agreement with the Australian Taxation Office to settle an outstanding dispute regarding past tax assessments.
On the downside, Experian Group dipped 0.8 percent after rising in the previous session when Morgan Stanley started coverage on the stock with an "overweight" rating. The benchmark index's rise came despite UK data that left the door firmly open for at least one more interest rate hike this year.
A BoE survey earlier showed Britons expected inflation over the coming year to hold firm at a series high of 2.7 percent while official data revealed retail sales growth beat expectations in May, rising an annual 3.9 percent.
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