The blue-chip index <.FTSE> rose 1.3 percent on Thursday after the U.S. Federal Reserve pledged to support economic growth, boosting miners and other cyclicals stocks and setting the index on course for another week of gains.
But the FTSE 100's close below a technical resistance level underscored an underlying caution in investor sentiment.
Buyers piled into equities as the prospect of a prolonged period of low interest rates and possible quantitative easing in the United States threatened to dilute the value of cash and returns from bonds.
Miners <.FTNMX1770> provided the biggest boost to the index, rising 4.2 percent on expectations the Fed's supportive stance would stimulate demand for industrial metals, such as copper.
Gold mining specialists such as Randgold and Fresnillo rose between 4 percent and 5 percent as investors bought the yellow metal as a hedge against a weakening dollar.
Miners lost 30 percent of their value last year, Kate Craig, an analyst at Oriel Securities said. They might have come back 15 percent but given the Fed's comments this morning there could still be some way to go.
The sector also found support after Anglo American , Lonmin , Petropavlovsk and Kazakhmys all reported solid output figures.
They helped the FTSE 100 rise 72.20 points to 5,795.20, although the index failed to close above a key technical resistance at 5,800, a bearish signal that points to possible consolidation in coming days.
Having risen 1.2 percent since Monday, Britain's blue-chip gauge was on track to record a fifth week of gains out of the last six.
Clearly people are wanting to put money to work in risk assets and that is an encouraging sign, no doubt about it, Alex Paterson, a trader at Liberum Capital said.
What makes me nervous is that there are very high expectations we will see a blockbuster (Fed) intervention and there is a strong danger that does not happen.
Paterson argued the Fed would be reluctant to embark on a new round of quantitative easing if the recent, extended string of upbeat U.S. economic data continued.
New orders for U.S. manufactured goods rose in December and a gauge of future business investment rebounded, indicating the U.S. economy ended the year with more momentum than previously thought, data showed on Thursday.
The reading was likely to heighten expectations ahead of U.S. GDP data for the last quarter of 2011, due to be released on Friday.
Strategists were reluctant to buy into the recent rally, which was driven by a rebound among battered down cyclical stocks, such as banks <.FTNMX8350>, industrials <.FTNMX2750> and miners.
We remain reticent in chasing the market, Standard & Poor's Capital IQ analysts said in a note. Cyclicals outperformance over defensives has been extremely strong over the past five weeks...(which) suggests that the best of the low-quality rally is a fait accompli.
They said a period of digestion would be logical after such a steep rally and kept a decidedly neutral stance on European equities.