Blue-chip index was higher by midday on Thursday in anticipation of more upbeat data from the United States and expectations Greece will secure the debt-swap deal it needs to avert a default.
Traders said investors were positioning for further signs the world's largest economy is recovering when the U.S. Labor Department publishes initial claims data for last week at 1.30 p.m. Claims are forecast to be flat week on week at 351,000 after a better-than-expected employment report on Wednesday, and raising expectations ahead of Friday's all-important non-farm payrolls.
We had an ADP number which was strong and there is a lot of talk we're going to get another solid number on the non farms, Giles Watts, head of equities of City Index said. Things look like they may be turning the corner there.
Revived economic optimism boosted cyclical stocks, with personal goods, industrial metals and engineering and construction material stocks all up between 2.9 percent and 3.3 percent.
The FTSE 100 index rose 78.54 points, or 1.3 percent, to 5869.91 at 12.23 British time.
Heavyweight mining stocks added 21 index points, breaking above the 23.6 percent retracement of the Feb 29 - March 6 fall, helped by talk that China, the world's largest consumer of metals, was about to ease its monetary policy to revive its economy after cutting its GDP growth target for this year.
The banking sector gained 1.6 percent after major banks and pension funds accepted Greece's bond swap offer to private creditors, making it increasingly likely the deal would pass, averting an immediate default that could spread the debt crisis to Italy and Spain.
Schroders was one of just five blue-chip fallers, dropping 1.5 percent having already traded 85 percent of its volume average, as the investment manager's full-year results prompted Peel Hunt to cut its rating to hold from buy, saying the stock is looking pretty fully valued.
CENTRAL BANK ACTION
Investors showed little reaction to, as expected, news that the Bank of England had made no change on Thursday to its current monetary policy following its latest meeting.
The European Central Bank will unveil its latest monetary policy decision at 1245 GMT, with no changes expected from the ECB either.
The ECB was expected cut its economic growth forecast for the euro zone, a development which was regarded as already priced in after manufacturing data earlier this week suggested the region was unlikely to avoid a recession this year.
An ECB growth revision would have little impact on the UK market, because the market has already discounted it, Jeremy Batstone-Carr, strategist at Charles Stanley said.
Data has already suggested the region is in for a torrid year.
Shares in UK insurer Aviva gained 2.5 percent on Thursday after saying its capital reserves had recovered after taking a hit last year from the euro zone debt crisis and reporting a bigger-than-expected 6 percent rise in 2011 earnings.
(Additional reporting by Alessandra Prentice; Editing by Andrew Callus)