From a sluggish start, the FTSE climbed until almost back through the 6,000 barrier, before falling slightly to close up 47.6 points or 0.81 per cent at 5,943.85.
Defensive stocks gave the index strength while the market shrugged off early fears about banks after Saturday’s speech by John Vickers, chair of the Independent Commission on Banking, arguing that UK banks need higher capital requirements.
Defensive stocks benefited as uncertain investors focused on resilient companies. Tobacco stock British American Tobacco was the biggest gainer, rising 3.96 per cent or 90.50 points to close at 2,373p.
Pharmaceutical firms Johnson Matthey, AstraZeneca, and GlaxoSmithKline all recorded large gains: Johnson Matthey closed 2.44 per cent or 46 points higher to close at 1,931p; AstraZeneca closed 2.31 per cent or 68.5 points up at 3,032p and GSK rose 2.03 per cent or 23.5 points to finish on 1,179.5p.
Pub and hotel company Whitbread finished 3.08 per cent higher at 1,773p up after Citigroup upgraded it to a buy, on the basis that the company is trading cheaply after cost cutting and an increase in room numbers.
Lloyds Banking Group (down 3.44 per cent at 65.05p) and RBS (down 1.91 per cent to 44.08p) both remained low after Vickers’ speech on the possible separation of the retail and investment bank arms.
The banking sector was also knocked by instability in the euro zone after Ireland's junior coalition party withdrew from Prime Minister Brian Cowen's government.
“Investors are feeling little reason to turn bullish on a sector that has remained out of favour in recent months, with both lending and trading income having dropped off,” said Yusuf Heusen, senior sales trader at IG Index.
Prudential fell 1.58 per cent to 654.5p after JP Morgan moved it to “underweight” in a note today.
Ocado continued its recent surge to head the risers of the FTSE 250, closing up 5.29 per cent or 12 points to 239.00. The group, whose main customer is Waitrose, reported a fourth quarter sales increase of 27.4 per cent earlier this month.
De La Rue was the only double-digit loser, falling back 15.19 per cent or 124.5 points on news that its board had rejected a revised 935p-per-share bid from French firm Oberthur Technologies.
Premier Foods is lower after selling its non-meat business, which includes its Quorn brand, to a private equity consortium for £205m to reduce its debt burden. The price is less than the £230m some had reported as Premier’s asking price for the division, and leaves the company with a long way to deleverage from its current £1.37bn level.
The US market has benefited from an uptick in tech shares today, led by Intel which announced a $10bn share buyback in a bid to boost its share price.
Fast food giant McDonalds reported earnings in line with expectations but failed to impress investors after warning that food prices would be pushed higher in 2011.
“US markets have pushed higher on the open after a fairly lacklustre European session,” said Hewson. “The banking system remains in the spotlight ahead of American Express earnings after the bell tonight. Expectations are for earnings of $0.97c a share.”
The Dow Jones industrial average was up 108.07 points, or 0.91 per cent, at 11,979.91. The Standard & Poor's 500 Index was up 7.33 points, or 0.57 per cent, at 1,290.68, while the Nasdaq Composite Index was up 27.48 points, or 1.02 per cent, at 2,717.02.