FTSE at 31-month high

Britain's top share index hit a 31-month closing high on Wednesday, boosted by banks after a successful bond sale in Portugal eased investor concerns over Europe's sovereign debt crisis, and as miners tracked metals prices higher. The FTSE 100 ended up 36.69 points, or 0.6 percent, at 6,050.72, its highest close since early June 2008, finishing in positive territory for the second day in a row.
Banks added the most points to the blue chip index, as risk appetites returned to the market after Portugal sold 1.249 billion euros ($1.62 billion) in two bond maturities to strong demand, taking some pressure off the indebted country to seek a bailout. Heavyweight HSBC led the sector higher, up 3.8 percent.
"Obviously the Portuguese bond auction being successful helped to keep the market in the positive today, but we're not seeing a lot of flows going through," Martin Dobson, head of trading at Westhouse Securities, said. Insurers Legal and General and Aviva gained 2.8 and 3.1 percent respectively, while mid-cap fund managers Gartmore and Henderson added 13.7 percent and 9.3 percent after the two announced a merger.
Mining stocks tracked firmer metals prices, with Kazakhmys and Vedanta Resources, up 3.7 percent and 4.3 percent respectively, also helped as Deutsche Bank upgraded the pair to "buy". Analysts said improved market sentiment was also underpinned by hopes that the European Union will increase its fund for helping member nations out with their debt problems.
"If we can get an absolute commitment from the ECB that it and European states are prepared to extend the size of the European bailout fund, that would remove an awful lot of the doubts markets have still got about the solvency of European banks," Jim Wood-Smith, head of research at Williams de Broe, said.
"If we can get past that, we've then got a global situation where corporate profitability is extremely good, monetary policy is exceptionally loose and it's going to stay exceptionally loose, and that's a scenario which would support significantly higher global growth than is currently expected." Retailers weighed on the downside after J Sainsbury, down 2.2 percent on valuation grounds, issued a trading update.
Tesco shed 0.4 percent ahead of its trading statement on Thursday, with traders citing pressure from Sainsbury on its non-food business. "The creation of a sizeable non-food business is increasing the destination attraction of Sainsbury's largest stores and this appears to be achieved mostly at a cost to Tesco," broker Jefferies International said in a note. Also Vodafone dropped 1.6 percent, after the stock was downgraded to "equal weight" from "overweight" in a bearish note on the European telecoms sector by Barclays.