Banks and miners were firmer at midday on Tuesday as FTSE 100 neared 2012 highs ahead of a U.S. Fed meeting and U.S. consumer data, while insurers supported the gains after results from Prudential
London's blue-chip index <.FTSE> climbed 50.98 points, or 0.9 percent to 5,943.73 by 1130 GMT, although volumes were poor at just 25 percent the index's average 90-day volume.
Investors were given a boost after German ZEW sentiment data beat expectations by a large margin, boding well for a strong pick up in U.S. retail sales due for release at 12.30 p.m.
The country's benchmark index has bounced off early March lows as Europe appeared to make progress on tackling its debt crisis and U.S. data showed further signs of recovery in the world's biggest economy. But the FTSE 100 index is still within a trading range established in late February.
As with other markets we are in a period of consolidation. We are now entering a phase which will see the withdrawal of central bank liquidity, an end to QE (quantitative easing) and the prospect of rising interest rates which may well be hastened by inflationary pressures, Darren Sinden, trader at Silverwind Securities, said.
Given those circumstances it is perhaps not surprising that the market does not know exactly which way to jump.
The FTSE 100 has found a support level around its 20-day moving average, but is edging toward overbought according to its 14-day relative strength index.
Yield continues to be a supportive measure for shares with the FTSE 100 yielding 4.2 percent according to Thomson Reuters data, compared with gilt coupons around 2 percent.
Trading at 28 percent discount to our 2012 embedded value, of 330 pence, dropping to 33 percent for 2013 with a 6.1 percent forward yield, the shares have undoubted income attractions, Shore Capital said in a note, keeping its hold rating on the shares.
By midday, however, the shares were up just 0.2 percent as investors switched into Prudential. Panmure Gordon cut its rating to hold from buy on Standard Life saying its results were strong but the shares were nearing the broker's 240 pence target price.
Prudential was a strong gainer, up 1.4 percent after Britain's biggest insurer met forecasts with a 7 percent increase in its 2011 profit, helped by strong Asia growth.
Shore Capital said despite Standard Life's valuation attractions it preferred annuity companies such as Legal & General
Banks <.FTNMX8350> were the top gainers as the sector bounced off its previous session's lows and kept within the sector index's recent range of between 3,900 and 4,000.
Citigroup repeated its buy rating on Lloyds Banking Group
Citi also kept its neutral rating on Royal Bank of Scotland
Miners <.FTNMX1770> also rallied following falls on Monday, helped by a recovery in copper prices, up 1 percent as investors positioned themselves ahead of the U.S. Federal reserve meeting.
The Fed, whose statement is due at 1815 GMT, is seen keeping rates on hold.
Security services firm G4S GFS.L was also a faller, down 2.4 percent, after its in-line full-year results failed to excite investors.
The quarterly earnings season has been mixed. As of Monday, of the companies that have reported 51 percent have beaten or met expectations, according to Thomson Reuters Starmine data.
Earnings will be mixed as the European debt crisis plays out but valuations and their respective returns compared to other asset classes will continue to support equities, a London-based trader said.
(Written by David Brett. Editing by Jane Merriman)