Britain's top share index pushed higher near midday on Monday as a move by China to let the yuan rise brightened the demand outlook for commodities and improved investor's risk appetite, powering gains in miners and banks.
By 1046 GMT, the FTSE 100 was 55.96 points, or 1.1 percent, higher at 5,306.80, having earlier touched its highest level in a month, and after it closed 0.1 percent lower on Friday to end a seven-day winning run.
The index is up 2.3 percent this moh after sharp falls in April and May, as fears on Europe's debt problems have receded.
China's central bank said late on Saturday it was ready to make the yuan more flexible ahead of this weekend's G20 summit, citing a global economic recovery and more balanced external trade.
This prompted buying of riskier assets, with Asian and European stocks gaining broadly and U.S. futures pointing to a firmer start on Wall Street.
Metal prices firmed and crude rose to around $79 per barrel as investors grew more confident about China's role in the economic recovery.
Miners had the biggest impact on the index, with BHP Billiton and Rio Tinto gaining 4.3 and 5.3 percent, respectively, while Vedanta Resources was the star performer, up 6.4 percent.
"China's acted ahead of the G20 summit and it can be seen as recognition that they are taking their responsibilities seriously," said Peter Dixon, economist at Commerzbank.
"It reduces the chances of a trade war with the United States and removes a bit of uncertainty, and the market is unwinding some of the negative sentiment after the final denouement of the Greek debt crisis.
BP RETREATS AGAIN
Energy stocks were mostly stronger, but BP was the biggest blue-chip loser, down 4.3 percent as investors fretted once again about the mounting costs faced by the energy giant from the massive oil spill in the Gulf of Mexico.
The oil giant has lost nearly 50 percent since the oil started gushing in April.
Banks, which tend to move in tandem with investor's appetite for risk, were firmly higher, with sector heavyweight HSBC gaining 1.6 percent.
Some defensive stocks were weaker, however, as investors rotated into more cyclical areas, with utilities firm Severn Trent down 1.4 percent and pharmaceuticals major GlaxoSmithKline off 0.2 percent.
Investors were looking ahead to Tuesday's first, emergency budget from Britain's coalition government, with finance minister George Osborne set to deliver what is likely to be the tightest budget in at least 30 years.
Marks & Spencer fell 1.6 percent, with traders citing pessimism over a possible hike in sales tax from the budget, and a report in the Financial Times that it is unlikely to name a new chairman before July's general meeting.
Data offered tentative cause for optimism. Asking prices for British homes in June were 5 percent higher than a year ago, up from a 4.3 percent annualised gain in May, property website Rightmove said on Monday, but it said the market's recovery could stall this year.
No U.S. data is due for release on Monday, with investors likely to focus on the latest two-day Federal Reserve rate-setting meeting, the outcome of which is due to be announced after the London close on Wednesday.
