LONDON: British shares hovered just shy of their record level on Tuesday as banking stocks and EasyJet drove modest gains, while strong earnings results among mid-cap stocks drove the FTSE 250 to a fresh high.
The FTSE 100 index of Britain's largest companies was up 0.1 percent by 0900 GMT, near last Tuesday's record level of 7,533.70 points.
"I think there are reasons why the market can go higher from here. It doesn't look expensive versus earnings growth, and it doesn't look expensive in historical terms," said Callum Abbot, UK equity fund manager at JP Morgan Asset Management.
"The market is trading at 15 times forward earnings, which doesn't seem unreasonable given you are looking at earnings growth in the mid-teens," he added, pointing also to the index's yield being relatively higher than other developed equity markets.
Blue-chip gains were underpinned by banks RBS and Barclays, and defence contractor Babcock. Babcock rose 3 percent after a positive note from Deutsche Bank saying the stock could rebound if the defence contractor reports solid results on Wednesday.
Among top gainers, EasyJet rose more than 2 percent after a top-rated RBC analyst upgraded the stock, saying the airline had reached its profit nadir, and pointing to an expanding gap of strong customer rankings versus competitors.
The airline's shares recovered all the lost ground since a badly-received earnings update last week sent the stock tumbling.
Miners dragged on the index after shares in conglomerate Noble Group sold off aggressively in Singapore, with the firm forced to halt trading after a 32 percent plunge as ratings agency S&P downgraded it on weak cash flows and profitability.
Glencore, BHP Billiton, Rio Tinto and Randgold Resources fell 0.2 to 1.2 percent.
Merlin, which runs London attractions including waxworks museum Madame Tussauds and the aquarium, was among the biggest fallers at the open, down 1 percent after a deadly attack in Manchester caused a kneejerk reaction against the stock, which is exposed to domestic tourism.
The European travel and leisure sector was down 0.4 percent.
The more domestically-focused mid-cap stocks outperformed large-caps again, hitting a fresh record high at 19,984.66 points and up 0.3 percent as company results impressed.
Home emergency insurance provider Homeserve surged 13 percent to a record high after its full-year results beat expectations.
"Homeserve has increased investment in its front line staff and network," said Liberum analysts, adding that the firm's acquisition of online trader listings website Checkatrade in February could boost its access to an as yet untapped clientele.
Britain's biggest sandwich maker Greencore jumped 7.8 percent after its results came in ahead of expectations, alleviating investors' concerns about inflation denting consumer appetite, with what Jefferies analysts called 'reassuring commentary' around inflation recovery.
Small-cap tile retailer Topps Tiles was less upbeat about the economy, pointing to a challenging trading environment and saying full-year profit would come in at the low end of analysts' expectations. Its shares fell 5.6 percent, the top small-cap losers.
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