The leading shares moved higher on Wednesday morning, with investor risk appetite supported by a fresh string of solid blue-chip results and better than expected news on the resource-hungry Chinese economy.
The FTSE-100 index was up 1.2 percent, or 67 points, at 5,748.62 <.FTSE> by 0914 GMT, extending its year-start rally into February and tracking gains in continental Europe <.GDAXI>.
Copper prices rose after news that the factory sector in China -- a key consumer of natural resources from oil to metals -- unexpectedly expanded slightly in January.
Risk sentiment generally improved on the data's release as fears over an economic hard landing receded, Ashley Davies, analyst at Commerzbank, said.
Brent crude rose above $111 per barrel on worries tensions between Iran and the West may escalate, as well as benefiting from the Chinese data.
Heavyweight oil major BP
Results helped Johnson Matthey
Only four of the stocks in the FTSE-100 were in the red, and none of them by more than 0.5 percent.
The FTSE volatility index fell for a second day <.VFTSE>, signalling a pick up in investor risk appetite.
The blue-chip index FTSE 100 gained 2 percent in January, and has already erased half the loss sustained during a lacklustre 2011 as investors -- reassured by central bank cash injections -- snapped up banks <.FTNMX8350> and miners
The two sectors have outperformed since the start of the year, with gains of 13 percent and 15 percent, respectively.
The immediate worry of the autumn -- which was a freezing of the financial system in Europe -- has been removed. With valuation at attractive levels, earnings coming in at or around expectations, the markets have quite rationally made some headway, Gerard Lane, strategist at Shore Capital, said.
We are seeing that rotation from defensives into some cyclicality and the miners in the flows. I think that will continue because people came into the year very defensively positioned.
Aggressively positioned equity funds outnumber defensively placed ones nearly two-to-one, and most are upbeat on stock market prospects for the year ahead, according to a Citi survey of 115 funds across the globe.
The tone of the survey is consistent with other indicators suggesting investors have become much more upbeat in recent weeks. This leaves markets looking more vulnerable to adverse developments, Citi analysts said in a note.
A disorderly Greek default is generally seen as the biggest risk to equities, including British ones, though investors hope that can be avoided if a deal with private lenders is reached soon.
Economic headwinds also remain mixed. British house prices unexpectedly fell for the second month in a row in January, according to Nationwide Building Society, as the prospect of greater unemployment kept buyers in a cautious mood.
(Reporting By Toni Vorobyova; Editing by Dan Lalor)