Firmer banks and energy stocks, lifted by an improved outlook for the global economy, fuelled slight gains on Britain's top share index, pushing it to its highest close in over four months on Monday. The FTSE 100 ended 11.04 points, or 0.2 percent higher, at 5,439.19, up for a seventh consecutive day after it gained 1.1 percent on Friday, supported by non-farm payrolls data in the United States that was not as bad as expected.
The index closed at its highest since April 30, though it is still down 6.6 percent since mid-April when fears exploded over the state of Europe's sovereign debt. Non-farm payrolls data on Friday showed that job losses in the United States were much lower than forecast, giving a sustained bounce to the global equities market. But some investors were cautious after a sustained run-up in stocks, with the overall macro-economic picture being far from bright.
"People got so negative that the US data was a relief, but non-manufacturing PMI data was negative...and I am now a bit more concerned on equities," said Steven Bell, director at hedge fund GLC. Oil and gas producers led sector gainers, rising around 0.6 percent, with heavyweight BP up 1.2 percent after a Morgan Stanley note suggested up to 50 percent upside potential for the stock, following the oil spill sell-off.
A Financial Times report that BP had revived the potential sale of its Alaskan assets was also supporting the stock. Banks, whose performance tends to be driven by shifts in risk appetite, also rose on the continued positive sentiment, up 0.5 percent, led by a 1.3 percent gain in HSBC.
The index broke through the key 61.8 percent Fibonacci retracement of the April peak to July low, although volumes were very thin with the United States closed for its Labour Day public holiday. Trading was at just 42 percent of the 90-day average.
"We've broken through there now and have found some support ... which is helping to spur investors to build on their positions as well," said Joshua Raymond, analyst at City Index. Among individual stocks, Home Retail, Britain's No 1 household goods retailer, rose 2.6 percent after Seymour Pierce raised its rating to "hold" from "sell", ahead of its second-quarter trading statement on September 9.
On the downside, GlaxoSmithKline fell 1.5 percent after a European safety body said its Avandia diabetes drug should be pulled from sale over long-standing concerns it raised risks of a heart attack among users. Smith & Nephew, Europe's largest maker of replacement knees and hips, fell 1.4 percent after J.P. Morgan downgraded its growth forecasts for the firm. ICAP was also among the biggest fallers, with one trader citing technical resistance levels after some sharp gains last week.