Britain's top share index hit fresh intraday highs on Monday, with financial and commodity stocks gaining as Greece edged towards a deal to avoid a chaotic default and cyclicals remained in demand on hopes a global financial crisis could be averted.

London's blue chip index <.FTSE> rose 38.85 points, or 0.7 percent to 5,767.40 by 1212 GMT, while U.S. index futures pointed to a higher open on Wall Street later on Monday.

The FTSE 100 has risen 2.8 percent in the year to date, driven by cyclicals, which have been in demand as governments and central banks have sought to boost liquidity in the financial system in an effort to avoid an economic meltdown.

Gains this year have left the FTSE 100 looking close to overbought levels, at 66 percent on the relative strength index, where 70 percent indicates overbought territory.

But traders said while this may prompt some consolidation on the index, it was unlikely to disrupt the underlying positive momentum.

As the macro outlook has improved, helped by better than expected data in the United States and continuing growth in China, sentiment towards beaten down sectors such as banks <.FTNMX8350> and miners <.FTNMX1770> has also lifted.

We believe the rotation out of defensives and quality into beta and value will continue as long as global activity remains on an uptrend, said Mislav Matejka, an analyst at JPMorgan.

Demand was seen in integrated oils <.FTNMX0530>, a sector which has been a favourite among investors due to its growth profile and reliable dividends.

Royal Dutch Shell rose 1.2 percent as ING started its coverage on the oil major with a buy rating, on valuation grounds, and said its safe yield of 4.7 percent should support the shares.

Oil majors such as BP , up 2.4 percent, were also pushed higher as the oil price rallied on concerns over Iranian oil embargoes.

GREECE

Financials such as banks <.FTNMX8350> and insurers <.FTNMX8570> were higher as worries over the potential for a chaotic Greek default eased.

EU leaders met in Brussels with French finance minister Francois Baroin saying talks with Greece's private creditors were taking shape.

Traders said the CDS market is suggesting that a voluntary deal will be done, no credit event will occur and CDS insurance will not be triggered.

The cost of insuring Greek government debt went from just over 7000 basis points to just below 6000 basis points last week.

Traders also cited newspaper reports that France and Germany will call for a relaxation of global bank capital rules to prevent lending to the real economy being choked off, as boosting the sectors.

But Michel Barnier, European Commissioner in charge of financial regulation, said on Monday that he would stick strictly to the implementation of Basel III.

The FTSE volatility index <.VFTSE> -- a gauge of investors' fear -- has fallen around 16 percent in 2012 as fears of a global financial meltdown have eased.

Budgets remain under the threat as governments and corporates look to make inroads into bulging debt piles.

Defence contractor BAE Systems , however, rose 2.4 percent, as BarCap upgraded the firm to overweight from neutral, saying its large international sales exposure, balance sheet room and the high dividend yield make it a safer play in this environment of budgetary uncertainty.

As the FTSE 100 has rallied over the past week, some of last year's winners have suffered.

Industrial engineers <.FTNMX2750> have shed 1 percent over the past five trading days, as fund managers and investors switched out of safer equities into stocks that look cheaper on valuation grounds.

Weir shed 2.6 percent as JPMorgan downgraded its recommendation on the pumps and valves maker to neutral from overweight.

British engineer IMI fell 2.7 percent as UBS cut its rating to neutral from buy, while Credit Suisse said valuation for the company was stretched.

Elsewhere on the downside, perceived defensive stocks such as utility National Grid and household goods firm Reckitt Benckiser , down 0.8 percent and 1.2 percent, fell as investor risk appetite showed no sign of abating.

No major economic data was scheduled in the United States on Monday.

(Written by David Brett; Editing by David Cowell)