* FTSE 100 up 0.4 percent
* Cyclical sectors boosted after Spain and France sell bonds
* Aggreko surges as top risers promise investor returns
* Bank of England policy decision due 1200 GMT
By Alistair Smout
LONDON, March 7 Britain's top share index rose
on Thursday, extending gains after successful bond auctions in
the euro zone helped riskier sectors to post gains.
Cyclical stocks, which rise and fall with investor
confidence about the economy, gained after heavily indebted
Spain hit the top end of its fund-raising target in a bond sale
on Thursday, with yields at a French bond auction also falling.
"The success of the Spanish and French bond auctions have
helped stocks extend gains today. It's a good example of
institutional investors showing support to a euro zone which
previously they'd left behind," Matt Basi, head of sales trading
at CMC Markets, said.
The FTSE 100 had been up just 0.1 percent ahead of
the auctions, before extending its gains to be up by 0.5 percent
an hour later.
The cyclical sectors of basic materials, which includes
heavyweight miners, financials and energy, combined to add over
18 points to the index.
The broad-based gains extended to more defensive sectors,
with consumer staples such as Unilever and Reckitt
Benckiser among the top gainers.
Credit Suisse raised target prices on consumer staples under
its coverage by up to 20 percent, arguing that the sector was
By 1103 GMT, London's blue chips were up 27.69 points, or
0.4 percent, to 6,455.33, taking their cue at the open from
strength overnight in the United States, where the Dow Jones
Industrial Average . ended at another record high after
some positive job figures.
While the Dow on Wall Street continues to set fresh all time
highs, London's FTSE 100 remains around 4.5 percent off records
struck in 2007.
With the global economy still recovering, markets are
relying on support from central banks' loose monetary policy,
which is suppressing yields in bonds and other asset classes.
The top individual risers on the FTSE 100 were those
companies promising higher returns to investors.
The world's biggest temporary power provider, Britain's
Aggreko, rose 14.5 percent after raising its dividend
by 15 percent, with profit up 11 percent.
Engineer IMI also gained, up 5 percent after it said
it planned to buy back up to 175 million pounds ($263 million)
of its shares over the next 12 months.
Life insurer Aviva, however, tumbled 12 percent after
it cut its dividend by over a quarter to provide extra funds for
a turnaround strategy aimed at bolstering capital and profit.
BANK OF ENGLAND DECISION
The Bank of England is expected to hold interest rates at a
record low 0.5 percent at 1200 GMT, although chances are rising
that the BoE will decide to start buying assets again to support
a weak economy.
"With the country's AAA rating now shot and political
tensions rising over the sluggish return to growth that's being
seen, we've already noted a sway of opinion at the BoE to
increasing stimulus measures," Mike McCudden, head of
derivatives at stockbroker Interactive Investor, said in a
"Against this backdrop at some point it would seem likely
that attempts will be made to add more fuel to the fire."
($1 = 0.6643 British pounds)
(Additional reporting by Toni Vorobyova and David Brett;
Editing by Ruth Pitchford)