The top share index edged higher on Friday, bolstered by solid economic data and upbeat corporate reports, but concerns over a possible weak reading from a key U.S. jobs report later in the day kept gains in check.
London's blue chip index <.FTSE> was up 29.78 points, or 0.5 percent, at 5,825.85 by 1227 GMT, taking its gains for the year so far to 4.6 percent - more than double the current annual yields on UK government bonds.
Equities do look fairly attractive, giving good returns, there is therefore a fairly good incentive for pension funds and other investors, said Paul Mumford, senior fund manager at Cavendish Asset Management, which manages some 650 million pounds.
We've had some trading statements which have been slightly better than people have expected ... The banking sector has improved a little bit ... and the news from China and Far Eastern markets has been a little bit better.
Yield-hungry investors snapped up shares in Old Mutual
Fellow insurer Admiral Group
This announcement is good news for Admiral as it removes some uncertainty over the future of these arrangements, analysts at Oriel Securities said in a note, advising that investors use any gains in the stock to reduce exposure.
Shares in BT
That followed stronger outlooks earlier this week from several other bluechips, including catalytic converters supplier Johnson Matthey
Economic data releases have also brought some comfort, with Friday bringing news that Britain's dominant services sector expanded at the fastest pace in 10 months in January and solid weekly sales figures from the High Street bellwether John Lewis.
Reports from the United States, however, have been mixed, putting the focus firmly on the jobs data from the world's biggest economy due at 1330 GMT.
Reuters consensus points to the creation of 150,000 new jobs in January after 200,000 were added in December, but analysts cautioned that risks on the non-farm payrolls release are tilted towards a downside surprise.
There has been a negative seasonal factor for January's NFP due to the birth and death adjustment ... Since the statistical office fully implemented the birth and death adjustment from July 2003, we found that January nonfarm payroll first releases have always surprised the market on the downside (eight out of eight times), with an average surprise of almost minus 63,000, analysts at Credit Suisse said in a research note.
Societe Generale's models showed that stock markets are overvalued by around 2-3 percent based on long-term fair value implied by the payrolls data.
(Reporting By Toni Vorobyova; Editing by Sophie Walker)