The top share index rose in early deals with miners led up by metal prices and banks rallying as Citigroup kept its bullish stance on the sector, while the expectations of a Greek debt deal lingered in the background.
London's blue chip index <.FTSE> rose 12.37, or 0.2 percent to 5,902.36 by 9:32 a.m., pushing ahead after consolidating recent gains over the previous two trading days.
Trade remained thin -- the FTSE All-Share volumes just edged over 1.1bn Tuesday, the lightest trading day for three weeks, according to analysts -- suggesting caution among investors following recent gains.
The FTSE volatility index <.vFTSE> has also been creeping higher this week as traders wait for a debt deal for Greece.
Greek party leaders were set to meet again on Wednesday to try to strike a reform deal in return for the new 130 billion euro (108 billion pounds) rescue from the IMF and EU after a string of delays.
Until we hear anything in the next day or two it's difficult to see this market making to much headway, said Richard Hunter, head of equities at Hargreaves Lansdown.
If we get a definitive (deal) then inevitably we will see a relief rally. In the absence of that investors are loath to commit any fresh capital because there's the possibility they might not like what they hear, he said.
Banks <.FTNMX8350> rose as Citigroup reiterated its overweight stance on UK lenders, acknowledging the unprecedented deleveraging facing the sector but saying technical analysis suggested the sector could continue its recent rally.
Share observation of previous financial crises suggests that bank share prices usually trough only 1-2 years after the peak in loans and 3-5 years before the de-leveraging process completes. UK bank lending peaked in December 2009, Andrew Coombs, analyst at Citi said.
Citigroup said its near term preferred bank is Barclays
Royal Bank of Scotland
Miners <.FTNMX1770> were the strongest gainers, rising in tandem with base metal prices.
The volatility of the mining stocks is usually tied to the long-term demand story but I think we've got the prospect of a relief-rally as they were marked down on question marks over the Glencore/Xstrata deal, a London-based trader said.
The company, however, made more cash profit in six months than the $90 billion marriage of commodities trader Glencore
Elsewhere, Reckitt Benckiser
The company, which makes Cillit Bang cleaning products and Air Wick air fresheners, posted full-year results that beat market expectations.
It is perhaps too soon to say Reckitts is back but the Q4 results did look somewhat like the Reckitts of old ... with a nice beat vs. consensus (and our) expectations across the board, Bernstein Research said in a note.
Retailers Marks & Spencer
And Cairn Energy
Only one UK blue chip firm will trade ex-dividend on Wednesday, with software firm Sage Group SGE.L knocking 0.36 points of the FTSE 100 index.
(Editing by Hans-Juergen Peters)