The FTSE 100 rose on Thursday as gains in banks, which were given a boost by a Spanish debt auction and structural reforms by RBS
The UK's benchmark index <.FTSE> was up 22.02 points, or 0.4 percent at 5,692.84 by 1125 GMT.
RBS was up 9.2 percent as analysts commended the lender's plan to cull investment bank jobs and sell or shut equities and advisory business under a 3-year plan to further reduce risk and focus more on domestic retail and corporate banking.
We welcome this decision to further de-emphasise the company's less profitable, riskier and more capital intensive operations, Gary Greenwood, analyst at Shore Capital said.
Shore Capital, however, retained its sell rating on RBS reflecting ongoing economic challenges.
Banks' shares <.FTNMX8350>, which fell around 30 percent in 2011 on concerns over the potential collapse of the financial system, the cost of regulatory reform and exposure to Europe's debt crisis, rallied too as Spain saw demand for its new three-year paper at 1.8 times the amount on offer, with average yields easing to 3.384 percent, raising hopes the country could avoid future default on its debts.
The auction provided guidance ahead of an Italian bond sale on Friday.
Investors were also looking ahead to the Bank of England's decision on interest rates and the quantitative easing programme, due at 1200 GMT, with no changes anticipated.
The European Central Bank is set to announce its interest rate decision at 1245 GMT, also with no changes anticipated.
Fund manager Ashmore
small rise in assets in the fourth quarter.
Peel Hunt, which repeated its buy rating on Ashmore, said it is uniquely placed to benefit from the shift in institutional asset allocation and the valuation gives no credit to its emerging market exposure.
Miners <.FTNMX1770> were higher as China's annual inflation eased, raising the possibility of a shift in policy priorities away from containing price increases and towards supporting growth in the world's most voracious consumer of commodities.
The UK High Street continued to feel the pain of a bleak economic outlook and UK austerity measures, which forced consumers to preserve their cash over Christmas.
Tesco fell 14 percent to a 33-month low after the world's third-largest retailer said it would invest more in price cuts and its online business to win back sales, warning that would lead to minimal profit growth in its 2012/13 year compared with a forecast for a 10 percent rise.
Shore Capital cut its rating on Tesco to hold from buy.
1.5 percent respectively.
There was bad news too from mid-cap Home Retail
Struggling small cap chocolatier Thornton
Elsewhere, pay-TV group BSkyB
Energy shares <.FTNMX0530> slipped led by Royal Dutch Shell
Darren Sinden, senior sales trader at Silverwind Securities, said commodity stocks and (by virtue of their heavy index weighting the FTSE) could continue to see a push and pull effect as mining and oil shares ebb and flow on the strength of the dollar -- boosted by its safe haven characteristics and signs of an improving economy in the U.S. -- which is good for profits but bad for the underlying commodity prices on which their profits are built.
(Written by David Brett; Editing by Elaine Hardcastle)