Banks and drugmakers lift FTSE

By Simon Falush

LONDON (Reuters) - Strength in banks and pharmaceuticals stocks outweighed a retreat in heavyweight energy companies to leave the top share index 0.8 percent higher by the close on Thursday.

The FTSE 100 .FTSE index closed 25.12 points higher at 4,461.87, having closed up 31.96 points, or 0.7 percent, at 4,436.75 the previous session.

Banks were the biggest driver. Heavyweight HSBC (HSBA.L) gained 2.9 percent after Credit Suisse raised its rating to "outperform" from "neutral" and lifted its price target to 670 pence from 525 pence, saying the bank's funding and liquid asset ratios are better than the sector average.

Barclays (BARC.L) was the top FTSE 100 gainer, up 5.6 percent, while Lloyds Banking Group (LLOY.L) added 2.6 percent, and Royal Bank of Scotland (RBS.L) climbed 4.8 percent.

The company managing the government's stakes in Royal Bank of Scotland and Lloyds Banking Group could sell an "exchangeable bond" in the two banks, according to the Daily Telegraph.

After fairly directionless trade until midday, UK equities were bolstered by gains in the U.S. market after data showed sales at U.S. retailers rose in May and the number of workers filing applications for jobless benefits fell for a fourth straight week.

"The optimists have scored a point today with US jobs data topping analysts' estimates and retails sales rising for the first time in three months," said David Evans, market analyst at BetOnMarkets.com.

He said however, that the market still lacks clear direction, and while the index is up 28.9 percent since touching a trough in March, it has traded around the 4,400-4,500 range for the last month.

"It will take a meaningful breakout of the recent trading range before it can be said that either the bulls or the bears have got the upper hand."

GlaxoSmithKline (GSK.L) was firmly higher, up 2.6 percent as Morgan Stanley raised its rating to "equal-weight" in a review of European drug stocks, with the broker raising its sector view to "attractive" from "in-line."

Peer AstraZeneca (AZN.L) gained 1.3 percent. Three widely used antipsychotic medications, including AstraZeneca's Seroquel, appear safe and effective overall in treating children and teenagers with schizophrenia or bipolar disorder, a U.S. advisory panel said.

ENERGY DRAGS

Oil majors retreated after recent gains as crude prices consolidated around $72 a barrel, with BP (BP.L), Royal Dutch Shell (RDSa.L), and Cairn Energy (CNE.L) losing 0.9 to 1.6 percent.

Engineering firm Invensys (ISYS.L) was among the top blue-chip gainers, adding 5.5 percent, while mid-cap peer Tomkins (TOMK.L) took on 4.1 percent as Goldman Sachs hiked its rating for both to "buy."

Intertek (ITRK.L), however, lost 0.2 percent after Cazenove cut its stance to "in-line" from "outperform" after reducing estimates for the testing equipment firm for currency factors.

(Additional reporting by Jon Hopkins; Editing by Erica Billingham)