LONDON: Banks and mining stocks lifted British shares on Tuesday amid investor optimism around a vaccine-led economic recovery, while Royal Mail climbed after announcing a one-off dividend payment.

The blue-chip FTSE 100 index ended 0.5% higher, with bank and mining stocks including HSBC Holdings, Barclays, Prudential Financial, Rio Tinto, Anglo American and BHP among the biggest gainers.

Further gains were capped by weakness in defensive plays including consumer staples, healthcare and utilities.

The FTSE 100 has rebounded more than 38% from a coronavirus-driven crash last year, but has struggled to reach pre-pandemic highs due to lockdown measures that have curtailed economic activity and rising concerns around inflation.

Royal Mail added 2%, after saying it would pay a one-off dividend for the year ending March following recent upgrades to its financial outlook on the back of a surge in parcel demand during the pandemic and a recent pick-up in letter volumes.

Meanwhile, adding to the recovery hopes, Catherine McGuinness, policy chair at the City of London Corporation, told BBC Radio she was confident that trade would return for cafes, pubs, restaurants and other businesses as most workers are likely to return to their offices after the pandemic.

The domestically focused mid-cap FTSE 250 index climbed 0.7%, led by industrials stocks.

A.G. Barr, best known for Scottish fizzy drink Irn-Bru, fell 6.7%, after a 30.5% slump in full-year profit, as coronavirus-led restrictions imposed last December weakened sales in pubs and sapped demand for its products.