"Investors took the opportunity to squeeze the market higher in the absence of any US interest, but with a welter of earnings news to come this week the trend might not be your friend for long," said Mic Mills, senior trader at ETX Capital. Miners provided the main strength for the UK blue chips, boosted by a rally in metal prices, which recovered as demand worries ebbed away and recent dollar strength faded. The sector FTNMX1770 shed 3.8 percent last week after weaker-than-anticipated data from China and the United States.
Eurasian Natural Resources (ENRC.L), Anglo American (AAL.L), Kazakhmys (KAZ.L), Xstrata (XTA.L), Vedanta Resources (VED.L), Lonmin (LMI.L), Rio Tinto (RIO.L) gained 0.7 to 3.9 percent. Oil majors were modestly higher as the crude price CLc1 took on 0.5 percent, with Royal Dutch Shell (RDSa.L) and BG Group (BG.L) both up 0.1 percent, but BP (BP.L) ending flat.
Explorer Tullow Oil (TLW.L) added 2.2 percent on news it has dropped a plan to sell up to half its Ugandan oil fields assets and was pre-empting partner Heritage Oil's (HOIL.L) sale of its half share in two blocks to Italy's Eni (ENI.MI). Midcap Heritage Oil was up 7.4 percent on the pre-emption move. "There is virtually no downside for Heritage as Tullow needs to at least match the Eni bid," broker Arbuthnot said.
Banks found support as well, shaking off concerns over US peer J.P. Morgan's slightly disappointing results on Friday with plenty more earnings to come in the sector this week. Citigroup (C.N) reports fourth-quarter numbers on Tuesday, Bank of America (BAC.N) and Morgan Stanley (MS.N) on Wednesday, and Goldman Sachs (GS.N) on Thursday.
Lloyds Banking Group (LLOY.L), Barclays (BARC.L), Royal Bank of Scotland (RBS.L), and Standard Chartered (STAN.L) gained 0.6 to 3.2 percent. But sector heavyweight HSBC (HSBA.L) missed out, shedding 0.5 percent. Among individual gainers, Cadbury (CBRY.L) took on 1.8 percent after the confectioner's chief executive, Todd Stitzer said the company could be worth more than 10 pounds a share by 2013, in an interview published in the Daily Telegraph on Monday.
Predator Kraft (KFT.N), under British take-over panel rules, has until Tuesday January 19 to increase its 10.5 billion pound ($17.12 billion) hostile offer for Cadbury. But International Power (IPR.L) saw earlier M&A fuelled gains disappear, with the stock ending 3.4 percent lower after the generator confirmed it had held talks with France's GDF Suez (GSZ.PA) regarding an asset combination but that no agreement had been reached and discussions were no longer ongoing.
International Power shares had been the top FTSE 100 riser, up as much as 9.8 percent to a 15-month peak after a Sunday Times report said GDF Suez may make a bid for the British firm. Elsewhere on the downside, defence companies were weaker after BofA Merrill Lynch took a more cautious view on the sector in a review of European Aerospace issues.
BAE Systems (BAES.L) and Cobham (COB.L) fell 0.9 and 0.5 percent respectively as both were downgraded by Merrill to "neutral" from "buy". BSkyB (BSY.L) was also a big FTSE faller, losing 1.1 percent after a report in The Guardian said regulator Ofcom is planning to force the satellite broadcaster to reduce the charges it levies on rivals for using its Sky Sports channels.
And satellite communications firm Inmarsat (ISA.L) shed 0.3 percent as Goldman Sachs cut its rating to "neutral" from "buy" in a review of the European telecoms sector. Sterling reached a four-month low against the euro on Monday the dollar helped by news asking prices for houses in England and Wales rose an annualised 4.1 percent in January, according to property website Rightmove.