LONDON, April 3 - Britain's blue-chip index edged higher on Tuesday morning, extending gains into a third session and heading towards the upper end of a recent trading range, supported by oil stocks and financials.

London's FTSE 100 <.FTSE> was up 0.1 percent to 5,882.80 by 09:31 British time, after rising 106.44 points on Monday to record its biggest daily rise in two months after strong U.S. data revived optimism about a global recovery.

Doubts over the pace of growth and a conviction that the euro zone's debt crisis is far from solved had given pause to a robust rally for stock markets at the start of this year.

Often after a big rise we see a bit of a pullback but everything seems to have pushed on a bit further across the board so we are not expecting such big gains but we are still expecting a positive day, Mark Priest, equities trader at ETX Capital, said.

It's going to try for 5,900, that's the next level and further on we'd be looking to the psychological 6,000 but we're not expecting that for a while.

Charts also showed a push towards 6,000 was unlikely to be imminent as long as the FTSE did not break out of a recent range between 5,865.57 and 5,894.72.

This means that investors are going to have to be willing to pay up to trigger an upside breakout, and this is something they may prefer not to do, James A. Hyerczyk, technical analyst at Autochartist said.

It's easy to get excited about the price action after all, 100+ gains on the day have been scare, but despite this impressive action, the trend remains down on the daily chart.


Financial stocks gained, led by Aberdeen Asset Management , up 2.4 percent, as investors turned more positive on companies exposed to capital markets on expectations a strong first-quarter for equities and other assets will lead to earnings upgrades and higher dividends going forward.

Since the start of the year, market expectations have been improving, with ECB liquidity helping confidence and activity, Credit Suisse wrote in a note, raising its full-year revenue growth forecast for European investment banks to 1 percent from previous expectations of a 4 percent decline.

Arun Melmane, an analyst at Investec Bank, said Aberdeen was boosted by rising expectations after a strong trading update last week, which showed inflows into high margins funds.

He highlighted improving revenues will allow the company to pay down its debt and meet covenants, suggesting forward dividends may be raised.

Morgan Stanley described Aberdeen as a a core pick in the diversified financials universe, saying it offered better relative growth in terms of flows and margins and increasing capital distribution.

Icap was up 1.4 percent, helped by a bullish comment by Citigroup, which recommended buying the broker-dealer after the recent share price weakness and picked it as one of its most preferred stocks.

We think in the near term, there is a possibility of earnings upgrades driven by cost cuts, the bank says in a note. Longer term, we continue to consider ICAP the best positioned IDB (inter-dealer broker) to benefit from the OTC (over the counter) derivatives regulatory changes.

Oil stocks were also strong, tracking a sharp rise in crude prices on Monday on the back of signs of a sustained recovery in top oil consumer the United States and the prospect of tighter crude supplies from the North Sea <.FTNMX0530>.

The sector, which offers a 4.4 percent dividend yield, has been favoured by longer-term investors seeking a stable source of income at times of economic uncertainty in Europe.

Other sectors offering a high dividend yield, such as pharmaceuticals and food & general retailers, were also strong on Tuesday after data on Monday showed Europe's manufacturing sector contracted for the eighth straight month in March <.FTNMX4570> <.FTNMX5330>.

History shows that high dividend stocks tend to outperform other assets in periods of sluggish economic growth - which is exactly what we face now, Dominic Rossi, global chief investment officer at Fidelity Worldwide Investment, said.

In a low yielding, low growth world, investors should favour dividend paying stocks and strategies, with income likely to account for a much more significant part of equity total returns, going forward.

(Reporting by Francesco Canepa; editing by Patrick Graham)