Firmer bank shares lifted Britain's FTSE 100 index on Monday, aided by bullish comment on the sector from both Barclays Capital and JPMorgan, while a UBS upgrade also helped Cairn Energy higher.
By 0938 GMT, the FTSE 100 was up 17.85 points, or 0.3%, at 5,918.61, having closed 0.3% higher on Friday to give a rise for last week of 3.2%, its best performance since early November.
The index is almost flat on the year, with some of the gains seen in February erased by worries over the euro zone debt crisis, political turmoil in the Arab world, and the aftermath of the earthquake in Japan.
"The themes are going to be the same, with investors switching between risk-on and risk-off," Richard Hunter, head of UK equities at Hargreaves Lansdown, said.
"We're still going to have concerns around the situation in Japan and of course the sovereign debt situation in Europe — although there is some optimism that it might stop at Portugal, and not get as far as Spain," he said.
Technical analysis painted a gloomy picture for the index in the short term.
"If you link the February highs which is around 6,106 and basically draw a line through (to the high in March of 6,052) the trend line resistance from the highs comes in at 5,950," Michael Hewson, an analyst at CMC Markets, said.
"We've also got the 55-day moving average coinciding with (this trend line resistance), so even though people are generally more positive on stocks, I'm not at the moment until we take out (this trend line resistance)," he said.
CAIRN BOOSTED
Cairn Energy gained 2.5%, topping the blue-chip leader board to reach a high since October after UBS upgraded its rating on the oil explorer to "buy", saying there are likely to be positive outcomes to four drilling prospects.
Integrated oil stocks found favour, led higher by BG Group, up 0.5%, while Royal Dutch Shell managed a 0.1% advance, as Barclays Capital, in a note on European integrated oil stocks, identified the pair as among stocks with the "most aggressive growth stories to mid-decade".
Banks added the most points to the FTSE 100.
Barclays Capital said it has looked at 11 of Europe's largest banks and all are trading at a discount to sum-of-their-parts valuations, calculating that around 150 bln euros are missing from their market caps, although it adds the banks usually trade at a discount.
The broker said HSBC, Standard Chartered and potentially Royal Bank of Scotland, up 0.1 to 1.1%, appeared cheapest, also adjusting for things like capital shortfalls.
JPMorgan reiterated its "overweight" stance on banks, "a sector which will benefit from lower cost of capital, was the worst performer in the last 6-12 months but is attractively priced and will be supported by a recovery in credit demand".
Elsewhere among the risers, AstraZeneca added 1.2% after British and U.S. tax authorities reached an agreement over the drugmaker's tax affairs that will boost its earnings per share in 2011.
