Banks lead FTSE higher

Banking stocks led Britain's top shares higher on Wednesday on strong corporate earnings and optimism over a deal in Washington to increase the US debt ceiling and avoid default. The UK benchmark index closed up 63.83 points, or 1.1 percent, at 5,853.82, building on the previous session's 0.7-percent advance.
Solid US earnings, including from Apple Inc, have helped ease market tensions over sovereign debt issues in Europe and the United States which have triggered a 5-percent drop on the FTSE 100 index since July 7.
Chip designer ARM Holdings rose to near the top of the blue chip leader board, up 4.9 percent, as blockbuster sales of Apple's iPhone provided reassurance that demand for smartphones remains strong.
"I think investors have moved their minds on a little bit from some of the big macro concerns that remain in the backdrop and are starting to focus back on equity market fundamentals that are still very supportive indeed," said Henk Potts, market strategist at Barclays Wealth.
"There is a potential in the short term for investors to be spooked by the macro issues, but investors should be really looking to take advantage of this weakness to be buying into equities."
The banking sector index enjoyed its biggest one-day percentage gain in more than three months, as Barclays bounced 5.2 percent to top the FTSE 100 leader board, while Lloyds Banking Group added 4.1 percent. Market jitters ahead of Thursday's emergency summit on Greece's debt crisis were replaced by a feeling of cautious optimism.
French ministers said on Wednesday that European leaders were less divided than the media was reporting and were likely to reach an accord at the summit that will help Greece's debt woes.
Confidence was also boosted by signs of progress on a US budget deal. A group of Democratic and Republican senators presented a new plan on Tuesday that could revive stalled US debt talks and avert a default by the world's biggest economy.
"There are a lot of people that think the (recent) sell-off was just overdone a little bit," Angus Campbell, head of sales at Capital Spreads, said.
"Obviously the determining factors were concerns over the euro zone debt crisis, and of course the US debt ceiling - and it looks like a deal is just about to be forged there."
BP added 2.5 percent, with traders citing rumours that Anadarko Petroleum will bring forward a settlement with the UK oil major over liability for the Gulf of Mexico oil spill.
Elsewhere, ITV rose 3.8 percent as UBS retained its "buy" recommendation on the British terrestrial TV broadcaster.
J Sainsbury was among the biggest FTSE 100 fallers, off 0.9 percent, hit by a downbeat note from Citigroup that kept its bearish full-year 2011/2012 estimates for UK grocers.
"Scary numbers abound," Citigroup said in a note, pointing out that UK gross indebtedness was nearly 500 percent of GDP, up from 200 percent in 1990.
"The Big Four (grocers) are not preparing for a 'new normal' of low GDP growth, consumer thrift and slower population expansion. Rather they are all pushing for space growth, enhancing high gross margin-reliant service and meeting short-term profit goals by raising prices," the broker said. Wm Morrison Supermarkets was down 0.3 percent, while Tesco, up 0.1 percent, also underperformed the market. ICAP and Imperial Tobacco both fell after going ex-dividend.