FTSE closes higher as miners shine

By Tricia Wright

LONDON (Reuters) - The top share index closed higher on Wednesday, as risk appetite received a boost after reassuring signals on the UK economy, and with miners the biggest gainers after a jump in Chinese factory growth.

The FTSE 100 index .FTSE ended 36.20 points higher, or 0.7 percent, at 5,266.75, having touched a high of 5,301.14 earlier in the session, a level not reached since September 2008.

"On the whole the market has reacted well to some quite optimistic comments from the Bank of England inflation report," said Angus Campbell, head of sales at Capital Spreads.

"They seem to think that a V-shaped recovery is very much underway and we won't dip back into recession," he said.

Unemployment numbers were also welcomed. The number of Britons claiming jobless benefit in October rose by its smallest amount in 18 months, while the number of people in work rose for the first time in over a year, official data showed.

Miners shone, with investors heartened by data from China where factory output jumped to a 19-month high in October, and as the weak dollar buoyed metals prices.

A record gold price helped Randgold Resources (RRS.L), up 6.1 percent, hit an all-time peak and rebound from a dip after Tuesday's announcement of lower-than-expected quarterly profit.

Fresnillo (FRES.L), Rio Tinto (RIO.L), Lonmin (LMI.L), Antofagasta (ANTO.L) and BHP Billiton (BLT.L) added 2.1 to 5.9 percent.

The Bank of England said in its quarterly Inflation Report that inflation would be below target in two years' time if interest rates rise gradually from the middle of next year as financial markets expect.

However overall the Monetary Policy Committee saw broadly balanced risks of inflation being above or below their 2 percent target by late 2011, suggesting little immediate need for more quantitative easing.

RISK APPETITE RETURNS

Upbeat UK economic news gave banks, often beneficiaries of improved risk appetite, a shot in the arm.

HSBC (HSBA.L) put on 0.9 percent, extending Tuesday's gain following its third-quarter update, while Standard Chartered (STAN.L) and Lloyds Banking Group (LLOY.L) added 1.3 percent and 4.7 percent, respectively.

Barclays (BARC.L), however, extended losses made the previous session after its update, shedding 0.7 percent, and Royal Bank of Scotland (RBS.L) fell 1.7 percent.

Positive broker sentiment aided Schroders (SDR.L), up 3.7 percent, with UBS, Morgan Stanley and Citigroup all raising their price targets for the UK fund firm after its update on Tuesday.