The top share index recorded its biggest daily rise in over a month on Thursday, boosted by optimism about the U.S. economic outlook and the outcome of Greece's debt negotiations, although charts indicated that momentum could falter.

Cyclical stocks, which tend to perform in tandem with economic growth, rose as U.S. jobless claims data showed labour market conditions in the world's largest economy were improving, building on a positive employment report on Thursday and raising expectations ahead of non-farm payrolls on Friday.

Construction materials, industrial metals and engineering stocks all rose by 2.9 to 3.9 percent, also helped by talk that China, the world's number 2 economy and the largest consumer of basic resources, was about to ease its monetary policy to stimulate demand after cutting its GDP growth goal earlier this week.

Also supporting sentiment were signs that Greece was nearing a debt-swap agreement with its private creditors ahead of a 2000 GMT deadline. The deal would allow Athens to avoid a messy default that could leave larger economies such as Italy and Spain in need of financial help.

The FTSE 100 <.FTSE> index rose 68.32 points, the most since February 3, to end the day 1.2 percent higher at 5,859.73 points, having traded 93 percent of its 90-day volume average.

Anglo-French property developer Hammerson topped the chart, rising 5.5 percent in volume that was more than twice the average, with traders citing the impact of a read-across from the sale of a stake in French shopping mall peer Klepierre by BNP Paribas .

Given Hammerson's French exposure, this Klepierre deal is sure to provide a boost to valuations and sentiment for the UK-listed firm, one London-based trader said.

Wm Morrisons also outperformed, rising 1.7 percent in volume that was nearly triple its average after the food retailer posted forecast-beating full-year earnings.

PROFIT TAKING

Traders and technical analysts said the market could be ripe for some profit-taking in the coming days as recent catalysts faded and charts pointed to faltering momentum.

A lot of people rally ahead of the actual deal, and once the deal comes the market comes off, Trevor Coote, head of equity sales at Alexander David Securities, said.

My feeling is the market will drift off: the Greek deal will probably go ahead, but then what else can push the market higher?

He said he was waiting for the FTSE 100 to fall as low 5,620, driven by a correction in recent outperformers such as miners, before he would buy back into the market. <.FTNMX1770>

Charts on the index pointed to limited downside for the coming week, Philippe Delabarre, a technical analyst at Trading Central in Paris, said, adding the index was likely to be heading towards support levels at 5,755 and 5,710.

The 20-day simple moving average is turning down, and the daily RSI (relative strength index) has broken below a significant horizontal support at 52, Delabarre said.

Delabarre, however, did not expect the declines to be imminent, saying the FTSE could hit highs of 5,870 or even 5,905 in the very short term before turning lower.

(editing by Jane Baird)