FTSE hits 3-week high, boosted by banks
* FTSE 100 index up 0.7 percent
* Banks led higher by Lloyds target price upgrades
* Airlines recover on better passenger numbers
* Draghi comments, growth outlook fuel gains (Updates prices, adds detail, quote)
LONDON, Sept 5 (Reuters) - Britain's top share index rose to a new three-week high on Thursday as Lloyds led banks higher in what looked set to be the sector's strongest session in two months.
Lloyds rose 3 percent after both Bernstein and Morgan Stanley gave a target share price of 100p for the bank, currently trading at 73 pence, as the British government prepares for its transfer into full private ownership.
The sector was 2.4 percent higher overall, with banks set for their biggest daily rise since early July.
"Financials have been notably strong, and Lloyds had a good upgrade ... With smaller government ownership and a prospect of a dividend coming, we have seen the worst in Lloyds," Zeg Choudhry, head of equities trading at Northland Capital Partners, said.
Airlines, which fell sharply on Wednesday after a profit warning from Ryanair, were also strong risers, with easyJet and IAG both among top gainers after reporting much better traffic figures.
At 1436 GMT, the blue-chip FTSE 100 index was up 46.12 points, or 0.7 percent, at 6,520.86, set for its highest close since Aug. 15. Financials, including banks, insurers and asset managers, added over 26 points to the index.
Choudhry was targeting a close above 6,535 to confirm a breakout from the recent 50 point range which the index has been stuck in since the middle of August.
Europe has shown signs of economic recovery, yet the European Central Bank said on Thursday it was ready to provide more stimulus if necessary to help the euro zone's economy further.
However, despite improving economic data and continued monetary support, international tensions over Syria, where Russia and China have warned the United States against military intervention, have pegged the FTSE 100 back in recent weeks.
Matt Basi, head of UK sales trading at CMC Markets, said that uncertainty over Syria would "cap the upside for now."
"There's is now a lot of cash on the sidelines, however, where people have pulled back from equities, so if the Syrian crisis is dealt with swiftly and in a manner that doesn't cause major panic... then there's definitely room for good upside for the FTSE 100, and we could break through new highs." (Editing by Ruth Pitchford)
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