FTSE starts new year with 31-month high

Britain's top shares rose sharply on Tuesday, the first session of 2011, lifted back above the key 6,000 level by heavyweight oil stocks and banks, as solid economic data prompted a return of investor risk appetite. The FTSE 100 ended up 113.93 points, or 1.9 percent, at 6,013.87, its highest close since the start of June 2008, easily recovering the 1.2-percent loss it suffered on New Year's Eve.
Tuesday's advance followed strength from US and European markets on Monday when London was closed. Trading volumes came back to more normal levels after the thin sessions seen over the holiday period, with 104 percent of its 90-day daily average having traded. BP was the standout blue chip gainer, up 5.9 percent at a seven-month high, after reports rival Royal Dutch Shell considered a take-over bid, and that economic damages from its oil spill will be lower than forecast. Shell gained 1.1 percent.
"We're playing catch-up to the European markets which had a good start to the year the rally is being supported by some very good economic data," said Angus Campbell, head of sales at Capital Spreads. Data on Tuesday showed that British manufacturing activity grew at its fastest pace in more than 16 years in December, complementing data from the US on Monday showing its manufacturing sector grew for a 17th consecutive month in December.
Meanwhile China's factory inflation cooled in December, while manufacturing in Europe accelerated. Buyers came in for the banks, as worries over eurozone sovereign debt faded further into the background, with Barclays adding 4.2 percent and Royal Bank of Scotland up 4.1 percent.
An Exane BNP Paribas upgrade to "outperform" also helped RBS, with the broker saying a sharp sell-off on the bank's exposure to debt-hit Ireland presents a buying opportunity. Among individual blue chip gainers, Carnival Corp took on 3.8 percent after being upgraded to "buy" from "hold" by Deutsche Bank with an increased target of 3,700 pence. The main losers were stocks seen as defensive. Food producer AB Foods was down 1.4 percent, while utility International Power slipped 1.5 percent.