Blue-chip index rose on Tuesday morning, extending its climb towards recent highs on expectations of further monetary easing in the United States, while banks were boosted by bid talk.

Royal Bank of Scotland , up 6.5 percent, was the top blue-chip gainer after people familiar with the matter said Britain had held talks to sell part of its stake in the bank to Abu Dhabi investors.

Abu Dhabi, one of the oil-rich states of the United Arab Emirates, could be attracted to a deal after making billions of pounds on a bet on rival British bank Barclays during the financial crisis.

An investment should provide a floor for the share price and indicate visibility on RBS's recovery path and fair value, Oriel Securities said in a note.

Barclays and part state-owned Lloyds Banking Group rose 3.5 and 2.5 percent in sympathy.

They helped Britain's FTSE 100 <.FTSE> gain 35.02 points, or 0.6 percent, to 5,938.24 at 08:09 a.m., after posting its biggest daily gain in two weeks on Monday.

The index, which bounced off its 50-day moving average around 5,856 on Monday, continued to trend upward, according to Cheuvreux.

We expect the current congestion phase to complete during the current week followed by acceleration, the broker said in a note. The upside potential could reach the prior swing tops within the 6,050-6,100 target window.

Insurer Resolution was bottom of the table, falling 6.3 percent after it shelved a promised 250 million pound ($398.39 million) handout to shareholders because falling bond and stock prices had dented its finances.

We expect the news that RSL (Resolution) is to delay confirming the return of 250 million pounds of surplus capital to weigh on near-term investor sentiment, Barclays Capital said in a note.


Mining and industrial metals stocks rose 1 percent, tracking a 2 percent rise in copper prices on Monday after Federal Reserve Chairman Ben Bernanke pledged to keep an accommodative monetary policy, boosting demand expectations for risk assets such as commodities and equities <.FTNMX1750> <.FTNMX1770> .

The precious metal market had a pretty good day yesterday on the back of that so I probably see a little bit of a follow-through on the miners, Mark Priest, senior trader at ETX Capital, said.

They (investors) are hoping there's going to be another round of quantitative easing in the United States. A lot of people would feel foolish to go short at these levels if there's potentially another 200-300 points rally on the Dow.

The Dow Jones industrial average <.DJI> shot up 160.90 points, or 1.23 percent, on Monday to close at 13,241.63 points.

Kazakhmys rose 2.8 percent after its full-year results delivered a decent beat versus analyst estimates, according to Numis Securities.

Elsewhere, Compass Group , the world's biggest caterer, fell 1 percent after saying said challenging economic conditions in Britain and parts of Europe would lead to slowing organic sales growth in the first half compared with the same period the year before.

(Editing by Hans-Juergen Peters)