A global stock rally on tame US inflation helped Britain's benchmark share index to a near 7-year closing high, with retailer Sainsbury buoyed by stake-building and miners supported by bullish broker comments. The FTSE closed 1.2 percent higher at 6,732.4, its highest closing level since September 2000.
The index gained about 3.5 percent this week as US bond yields retreated from 5-year highs and tame core US inflation soothed fears of higher rates in the world's largest economy.
Sainsbury was among the top performers, up 4.4 percent, as Qatar's royal family raised its stake in the British supermarket group to 25 percent, fuelling expectations it could face its second take-over approach in as many months.
Also in the retail sector, Morrison added 2.6 percent and Tesco gained 1.7 percent. But Lonmin was the best-performing stock of the day, with gains of 4.8 percent, after Morgan Stanley said in a note the South-African focused miner was its top pick in the sector and raised the price target to 5,075p from 3,900p.
This further helped a recently well-performing sector, with Anglo American gaining 3.5 percent and Antofagasta rising 2.5 percent. "It's a commodities day with a throw in (of) a little bit of speculation on food and retailers. But commodities are the main leaders in the market," said Philip Isherwood, strategist at Dresdner Kleinwort.
"Surely the US has been strong in the last couple of days so that's a pretty good backdrop and the 10-year bond yields at least have settled down a bit." Stock markets fell sharply last week when expectations that interest rates globally were headed higher pushed US bond yields to 5-year highs, but yields have since come off those levels as investors were lured back by lower bond prices. Wolseley jumped 4.6 percent as traders cited market talk of a possible bid for the world's largest distributor of plumbing and heating products. Wolseley declined comment.
Oils made up the top-performing sector, contributing more than a fifth to the index's rise, as crude prices neared $72 a barrel. BP rose 1.1 percent and Royal Dutch Shell rose 2.1 percent.
Bucking the trend, Cadbury Schweppes Plc, the world's largest confectionery group, pleaded guilty to charges of selling unsafe chocolate in Britain and Ireland during 2006 and faces an unlimited fine. The stock fell 0.8 percent.
Analysts said the company unveils its new sweets strategy next week, with cost savings set to drive margins higher and new low-sugar sweets expected to push up sales in the future.In other news, sources familiar with the matter said British bank Lloyds TSB Group is seeking to sell its closed Abbey Life insurance unit, worth about 900 million pounds. The stock ended up 0.8 percent.
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