Top shares rose on Wednesday as a more upbeat global economic outlook and robust corporate earnings placed the FTSE 100 index within striking distance of the psychologically key 6,000 level, a breakthrough which could signal more gains.
The FTSE 100 <.FTSE> was up 20.28 points, or 0.3 percent, at 5,976.19 by 12.30 p.m, although volumes were thin, at 53 percent of the 90-day daily average.
Traders said if the index manages to clear the 6,000 level, this puts it within sight of last year's highs of 6,100.
Brightening the mood, the U.S. Federal Reserve improved its outlook on economic growth for the world's largest economy on Tuesday and said most large U.S. banks had passed their annual stress tests.
Banks <.FTNMX8350> were the standout gainers on the FTSE 100 index on Wednesday as the news was met with enthusiasm by investors already heartened by Tuesday's upbeat German and U.S. data.
The tone out of the Fed last night was fairly positive for risk -- they didn't implicitly say that they we're going to do QE -- if anything they rode back from it -- but I think the market thinks, Well it's a no-lose situation, Michael Hewson, market analyst at CMC Markets, said.
If the economic data's good then markets are going to go up and if it's not, the Fed's ready to step in and it will go up anyway.
Insurers also fared well, led higher by Legal & General
L&G has reported a very good set of FY results this morning with higher than expected cash and dividend the main highlights, BofA Merrill Lynch said in a note, repeating its buy rating on the stock.
Merrill said that L&G shares have performed well in the year-to-date, rising around 20 percent, and that it expected the stock's re-rating to continue.
Earnings momentum, or the pace of downgrades -- in the past a good indicator of changes in the equity market direction -- is starting to slow, providing investors with another reason to be optimistic.
We're in the positive camp, Robert Parkes, equity strategist at HSBC, said. We feel that we're through the worst now in terms of the earnings downgrade cycle.
For graph showing FTSE 100 earnings momentum click on: http://link.reuters.com/seb27s
Companies trading ex-dividend on Wednesday took the sheen off the FTSE 100's gains, knocking 6.86 points off the index, with the most impact coming from HSBC
(Graphic by Scott Barber; Editing by Mike Nesbit)