Britain's top share index was higher on Thursday, led by firmer banks after recent upbeat earnings from U.S. peers and ahead of European stress test results, while strong June retail sales data also helped.
By 0908 GMT, the FTSE 100 was 31.69 points, or 0.6 percent higher at 5,246.33, having closed up 1.5 percent in the previous session.
Banks provided the main strength for the blue chip index, with Barclays and Standard Chartered the best performers, adding 1.3 percent and 1 percent respectively.
"There's just generally a bit more optimism, particularly considering Morgan Stanley's results yesterday were absolutely amazing really," said Joshua Raymond, market strategist at City Index.
"Also there's been some betting from clients that the stress test results aren't going to be as bad as the market had feared some weeks ago," he said.
The European Union examination of banks' financial strength is due on Friday, and is expected to show generally positive results for Greece, Italy and Ireland and a few failures in Portugal and Spain.
Gains by miners and oils also lent their strength to the blue chips as commodity prices rallied, with Anglo American the best performer for the miners, up 2.3 percent, while for the oils, Royal Dutch Shell gained 0.8 percent.
But BP missed out on the sector gains, off 0.2 percent, unsettled in part by news a U.S. Senate panel is inviting the firm's Chief Executive Tony Hayward to testify next week at a hearing on the release of the Lockerbie bomber.
There was some positive economic data, as British retail sales volumes received a World Cup boost in June after strong sales of electrical goods drove a faster-than-expected 0.7 percent monthly rise, official data showed.
But trading was volatile and investors' underlying mood still cautious following a downbeat assessment of the U.S. recovery by Federal Reserve Chairman Ben Bernanke on Wednesday.
The Fed stands ready to ease monetary policy further if the budding U.S. economic recovery withers, Bernanke said on Wednesday, describing the outlook as "unusually uncertain".
In Britain, inflation is not expected to return to its 2 percent official target before the end of next year, the Bank of England's Chief Economist Spencer Dale was quoted as saying in the Independent newspaper.
CAPITA CONQUERS
Capita was the top FTSE 100 riser, up 2.9 percent, after the outsourcing group posted a 15 percent rise in first half profit and said it was seeing buoyant demand across the private and public sectors, strengthening its bidding pipeline.
In reaction to the results, Evolution Securities upped its rating for Capita to "buy" from "add".
Software firm Autonomy was the top FTSE 100 faller, down 8.3 percent, after second-quarter earnings left investors negative.
"We estimate that after adjusting for one-offs, Autonomy failed to grow its core business in Q2 2010," KBC Peel Hunt said in a note, maintaining its "sell" rating on the stock.
Imperial Tobacco shed 2.7 percent after it said cigarette volumes fell 4.3 percent in the nine months to June, denting sentiment on the stock.
And Kingfisher slipped 1.7 percent after Europe's biggest home improvements retailer reported a slightly worse-than-expected 0.8 percent fall in second-quarter underlying sales, including a particularly weak performance at British chain B&Q.
Fellow household goods retailer Home Retail also fell 1.7 percent.
Investors were awaiting the next batch of U.S. earnings, with software giant Microsoft and online retailer Amazon.com among those reporting on Thursday.
