The FTSE 100 closed up 0.1 per cent, or 7.23 points higher, at 5,921.63 points – its highest close since finishing at 5,961.11 points on 19 March.
The FTSE initially fell after Italian Prime Minister Mario Monti said over the weekend that he planned to resign, increasing political uncertainty in the heavily indebted country and probably bringing forward elections to February.
However, it then pared those losses and gained ground after breaking through and holding above the technically important level of 5,910 points – a level where it had previously tended to fall back.
Traders said fund managers would still look to put money in equities before the year-end, with stocks offering better returns via dividends than cash or sovereign bonds, where returns have suffered with interest rates at historic lows.
Healthcare company Smith & Nephew topped the FTSE 100 leaderboard with a 1.9 per cent gain, after Investec raised its rating to “buy” from “hold”.
Major mining stocks such as Rio Tinto also contributed to much of the FTSE’s gains, with the FTSE 350 mining index gaining 0.3 per cent. Rio was up 0.66 per cent at 3,277.50p.
Oriel Securities strategist Darren Winder said UK miners could be on track for a strong 2013, and traders added that economic growth in China – the world’s top metals consumer – would boost miners’ prospects.