Britain's top share index closed up 0.2 percent on Monday as buoyant banks and defensive stocks countered weak miners and oils, keeping the index above 5,000 amid optimism over the pace of the rally seen since March. The FTSE 100 closed up 7.38 points at 5,018.85, its highest closing level since late September 2008. The index traded as low as 4,953.71 during the session.
"You come back to the old question 'do you want to stand in the way of a bulldozer?' And the bull market is a bulldozer, and it's going up, and if you don't believe it, you're going to get flattened by it," said Jim Wood-Smith, head of research at Williams de Broe. The British index has risen 45 percent since hitting a six-year trough in March, though is still down over 7 percent from its level prior to the collapse of US bank Lehman Brothers a year ago.
"The next very short-term target for the FTSE 100 is going to be 5,200 and after that it's 5,600 and then it's 6,000 - but that's a wee way away yet," Wood-Smith said. Banks added the most points to the index, rebounding from falls earlier in the session, with HSBC, Standard Chartered and Lloyds Banking Group up 0.3-1 percent.
However, ratings firm Moody's said the credit outlook for British banks remains negative for the next 12-18 months, reflecting weakness in the domestic economic environment. Defensive telecoms, pharmaceutical and tobacco stocks were in demand. Heavyweight Vodafone put on 0.7 percent, while GlaxoSmithKline added 0.6 percent and Imperial Tobacco rose 0.3 percent.
Defence companies, also seen as less risky assets, were in favour, with BAE Systems grabbing the top spot on the FTSE 100 leaderboard, up 2.1 percent, followed by Cobham, also 2.1 percent firmer. Cadbury, which has soared this month after it rejected a bid approach from Kraft, advanced 1.4 percent on the possibility the US company could go hostile.
A letter from Cadbury chief executive Roger Carr to Kraft chairman and CEO Irene Rosenfeld said the Kraft take-over proposal fundamentally failed to reflect its current value. Energy stocks suffered as crude eased below $69 a barrel on Monday, after a decision by a major US commodities exchange to enforce limits on large positions increased uncertainty and the dollar strengthened slightly. BG Group, BP and Tullow Oil dropped 0.1-2.3 percent.
Against a background of weaker metals prices, miners were also pressured, with Eurasian Natural Resources Corp, BHP Billiton, Rio Tinto and Antofagasta down 0.5-3.1 percent. Copper slid to its lowest in more than a week as analysts started to talk about falling imports and the possibility of higher exports by China, the world's largest consumer of industrial metals.
Among other fallers, private equity group 3i lost 1.1 percent after agreeing to sell a portfolio of investments in small European companies to a consortium of rivals for around 130 million pounds.
A broker downgrade weighed on Johnson Matthey, off 1.5 percent as Morgan Stanley cut its rating for the fine chemicals and precious metals firm to 'equal-weight' from 'overweight' given limited upside to its increased price target of 1,450 pence due to the stock's underperformance. Investors are looking ahead to the August RICS UK house price survey, to be released overnight, British CPI numbers for August on Tuesday and a batch of retailers' first-half results this week.
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