* FTSE 100 gains 0.1 percent
* IAG and Polymetal lead gainers after upgrade
* Investors unwilling to bet on the broad index ahead of GDP
* Low volatility suggests underlying confidence in market
By Alistair Smout
LONDON, Jan 25 British blue-chips gained in early trade on Friday, as individual company newsflow outweighed investor caution ahead of UK GDP figures and helped the market push on to new multi-year highs.
IAG topped the FTSE 100 leaderboard, up 3 percent and hitting its highest level in 18 months in strong volume, benefiting from a continued readacross from easyJet's results on Thursday and after JP Morgan upgraded the stock to "overweight", traders said.
Also gaining was Polymetal, which added 2.2 percent, benefiting from an upgrade by investment bank UBS to 'Buy' from 'Neutral.'
"We think that now is the right moment to use weakness in the stock price as potential merger with Polyus Gold may be a strong driver," analysts at UBS said in a note, raising their target price for the stock to 1,300p.
"It's a stock-pickers market at the moment. The key gainers are fundamentally driven, but as an index we are waiting for the GDP print," said Jack Pollard, analyst at Sucden Financial Private Clients.
Fourth quarter GDP data is due for release at 0930 GMT, with a small contraction expected by economists.
By 0850 GMT, the FTSE 100 index was up 5.55 points, or 0.1 percent, having reversed early falls to hit a fresh 4-1/2 year high, in tandem with European indices after a German sentiment indicator came in better than expected.
Polymetal aside, the mining sector in general eased off, with companies such as Evraz, BHP Billiton and Rio Tinto the top fallers after the sector added 1.5 percent yesterday.
Even with early caution, none of the top fallers were down more than 2 percent and few investors were seen as willing to take a punt on the direction of the market as a whole ahead of the British GDP figures.
A Reuters poll forecast the UK economy contracted 0.1 percent in the last quarter of 2012, raising the risk that Britain is heading for a triple-dip recession.
Volatility on the FTSE dipped 2 percent and was low even during early falls, indicating confidence in the broader index and suggesting that there were few bets that the index would fall dramatically in the coming days. (Editing by Catherine Evans)