By Simon Falush
LONDON (Reuters) - Financials gained on growing investor confidence by midday on Tuesday and higher commodity prices lifted miners, but weak results from Marks & Spencer <MKS.L> dented retailers, limiting gains for the top share index.
By 11:56 a.m. the FTSE 100 <.FTSE> was up 1.3 percent or 55.70 points at 4,502.15 after gaining 2.3 percent in the previous session, recovering all of last week's 3.5 percent fall and on track for its highest close in over four months.
The world's top policymakers offered their most upbeat assessment of the global economy in months on Tuesday, saying it was stabilising and that it could start to grow again as soon as late this year.
This added to the sense that the demand outlook was improving, lifting metal prices and boosting mining stocks.
Rio Tinto <RIO.L>, Kazakhmys <KAZ.L>, Eurasian Natural Resources <ENRC.L>, Anglo American <AAL.L>, Lonmin <LMI.L> and BHP Billiton <BLT.L> gained between 1.8 and 6.6 percent.
"There's a feeling that the rally has a bit more to run... and investors are looking to get in at lower levels after last week's stumble," said Peter Dixon, economist at Commerzbank.
Financial stocks were also beneficiaries of the improved sentiment, while news that Britain has held talks with investors to gauge their interest in part-nationalised lenders also boosted interest in the sector.
International interest in the potential sale of parts of the UK banking sector also helped to boost the pound, which hit a five-month high against the dollar.
"There's a sense that the worst is over for the financial sector and (the potential sale of stakes in UK banks to overseas investors) is adding fuel to the fire," Dixon said.
HSBC <HSBA.L>, Standard Chartered <STAN.L>, Royal Bank of Scotland <RBS.L>, Barclays <BARC.L> and Lloyds Banking Group <LLOY.L> added 1.3-4.4 percent.
Life insurers were also buoyed by the increase in risk appetite. Aviva <AV.L>, Legal & General <LGEN.L>, Prudential <PRU.L>, Standard Life <SL.L> added 2.3-6.5 percent.
RSA Insurance <RSA.L> gained 4.4 percent after being upgraded to "overweight" by JP Morgan.
ICAP <IAP.L> added 7.8 percent after the world's largest interdealer broker beat forecasts with a 5 percent rise in annual pretax profit. [ID:nLJ167560]
Thomson Reuters <TRIL.L> added 6.2 percent after Morgan Stanley upgraded the global information and media group to "overweight" from "equal-weight" and hiked its price target.
Investors shrugged off data which showed CPI falling to 2.3 percent in April, it's lowest in over a year, and RPI falling to -1.2 percent, the lowest since records began in 1948.
SPARKLE DIMS FOR MARKS
But the blue chip index underperformed its European peers as signs that UK consumer spending is suffering in the face of the recession hurt retailers.
Marks & Spencer <MKS.L> was the heaviest faller on the FTSE 100 index, down 6.8 percent after it posted an expected 40 percent slide in full-year profit and cut its final dividend to preserve cash.
The retailer has had a strong run this year and is still up 64 percent since its trough for the last 12 months set in September.
Peer Next <NXT.L> slipped 3.9 percent while other retailers also suffered, with Tesco <TSCO.L>, Morrison <MRW.L> and Home Retail <HOME.L> off between 0.3 and 1.3 percent.
Rolls Royce <RR.L> fell 2.5 percent after UBS cut the engineer to "sell" from "neutral."
(Reporting by Simon Falush; editing by Mike Nesbit)