Britain's top share index rose on Tuesday, helped by a rally in banking stocks ahead of the European Central Bank's upcoming liquidity injection, and by miners after encouraging U.S. economic data improved the demand picture for metals.
The benchmark FTSE-100 index <.FTSE> was up 10.73 points, or 0.2 percent, at 5,926.28 by 0945 GMT, following Monday's 0.3 percent dip.
Banks <.FTNMX8350>, significant fallers in the previous session, recovered their poise, with the sector in focus ahead of the ECB's second longer-term refinancing operation (LTRO) on Wednesday.
The enormous injection of liquidity provided by the ECB's first LTRO in late December, which removed concerns about a liquidity crunch in Europe, is widely considered to have helped fuel the rally in risk assets seen since the start of the year.
The LTRO is one means by which market confidence is rebuilding ... However it is economic growth and profits that will determine the durability of equities' rally. Both look supportive but not rocket fuel, said Andrew Bell, chief executive of Witan, a 1.1-billion-pound investment trust.
I think with a following wind from growth the FTSE 100 can reach 6,500 this year, but expect periods of nerves as the market looks over its shoulder every time there is a growth wobble.
The mining sector <.FTNMX1770> was another significant driver of the FTSE 100's gains, rising in tandem with metals prices after data showing further improvement in the U.S. housing market.
Concerns over the recent jump in oil prices continued to cast a shadow on the market, however.
While Brent crude futures fell back below $124 a barrel on Tuesday, prices have risen sharply, with Brent up around 11 percent this month on tensions over Iran.
The things that are driving this oil price at the moment are still unresolved and could get a lot worse ... We're seeing it in petrol prices and we feel the effect straight away, said David Morrison, market strategist at GFT Global.
Analysts reckon that for every $10 rise in the oil price, that's 0.2 percent off global GDP, and estimates for global GDP are only about 2.8 percent for this year, so if the price goes up by $20 or $30 then that's a real concern, he said.
Heavyweight energy stocks <.FTNMX0530> tracked the oil price lower on Tuesday, led down by a 0.3 percent fall in BP
A busy day for corporate earnings produced a mixed bag.
Sector peer Taylor Wimpey
The Indian refiner said a tribunal had ruled against the company in a case relating to its 30.2 billion rupee ($615 million) insurance claim for damages sustained by its refinery during a cyclone in 1998.
Trading volumes in Essar were robust, at 69 percent of its 90-day daily average, making it the second-most heavily traded FTSE 100 stock.
(Editing by Mark Potter)