Stronger energy stocks and miners powered Britain's top share index to a 21-month high by midsession Tuesday, as strong U.S. data over the holiday period brightened the outlook and investors shunned defensive stocks.
By 1201 GMT, the FTSE 100 was up 32.24 points at 5,777.13, having earlier hit a fresh 21-month intra-day peak of 5,790.40. The index climbed 1.2 percent on Thursday and was closed on Friday and Monday for the Easter holiday.
Energy stocks were the standout gainers after crude surged to its highest level since October 2008 on Monday, with BG Group , BP and Royal Dutch Shell adding 1.5 to 1.9 percent.
Against a backdrop of firmer metals prices, miners also rose. Xstrata, Kazakhmys and Vedanta Resources were among the best off, adding 1.2 to 3 percent.
"The FTSE 100 is really just moving on the view that there is now a very tangible sign of a sustainable recovery in America and I think America is looked to for financial and economic leadership," said Mike Lenhoff, chief strategist at Brewin Dolphin.
The U.S. services sector grew at its fastest pace in nearly four years in March and future home sales unexpectedly rose in February, data showed on Monday.
The UK blue chip index gained almost 5 percent in the first quarter of 2010, after it rose 22 percent in 2009.
The next resistance level for the FTSE 100 is 5,973. According to Stephen Pope, chief global equity strategist at Cantor Fitzgerald.
Also flagging an improving economy, the Conference Board, a private research group, said on Monday the U.S. job market strengthened for a seventh consecutive month in March, with fewer Americans having trouble finding work.
This added to a solid non-farm payrolls report on Friday which showed U.S. employers created jobs in March at the fastest rate in three years as private firms stepped up hiring.
BANKS FIRM
UK banks were also in favour, led by Royal Bank of Scotland , up 2 percent. U.S. billionaire and Wall Street turnaround expert Wilbur Ross is backing Virgin Money's bid to buy the branch network of RBS according to the Sunday Times and Sunday Telegraph.
Barclays, Lloyds Banking Group and Standard Chartered put on 0.5 to 1.1 percent.
Among individual movers, British insurer Admiral Group gained 5 percent, touching a life-time high. Investor sentiment was bolstered by recent management visits that have added to a conviction that it is well-placed to take market share from its rivals, traders said.
With investors' moods buoyed by signs of U.S. economic recovery, defensive stocks peppered the FTSE 100 fallers list. Imperial Tobacco shed 1.8 percent, Vodafone lost 1.6 percent, and AstraZeneca fell 1 percent.
BAE Systems lost 0.8 percent with traders pointing to a Goldman Sachs note sent on Monday which rated the defence company as a "conviction sell", though they noted that this was just a reiteration of the broker's existing stance.
British Prime Minister Gordon Brown confirmed on Tuesday that a general election will be held on May 6.
"(The election) is rather academic for the UK equity market. Don't forget we are talking about large, international blue chips whose business is, to a very large extent, outside the UK," Lenhoff said.
