FTSE hits 5-week highest close

The leading share index rose 0.8 percent on Wednesday, gaining for the third day in a row and hitting its highest closing level in more than five weeks, led higher by banks and commodity stocks.

The FTSE 100 closed 43.72 points higher at 5,372.38 in thin trade. The index pared some of the earlier gains after data showed sales of newly built single-family homes in the United States fell to their lowest level in seven months in November.

Volumes on the index were about 45 percent of its 90-day daily average on the last full trading day before Christmas. The market will close at 12:30 p.m. on Christmas Eve.

Commodity stocks were the top gainers, boosted by firmer raw material prices. Oil rose above $76 a barrel after key inventory data out of the United States showed crude oil inventories there falling more than expected.

BP, Royal Dutch Shell and BG Group advanced 1.1 to 1.6 percent.

But Cairn Energy shed 4.3 percent after rising more than 11 percent in the previous three sessions. The oil explorer said on Monday it had secured a rig to allow it to begin a drilling programme offshore western Greenland.

Among miners, BHP Billiton, Rio Tinto, Xstrata, Vedanta Resources, Eurasian Natural Resources and Kazakhmys added 2.1 to 3.8 percent.

"We have never predicted the magnitude of the recovery since March. I think next year will be a far more difficult period for investors. There is a lot riding on cyclical sectors which have done well. They could retreat" said Tim Whitehead, head of portfolio services at Redmayne-Bentley. 

The FTSE 100 has rallied 55 percent since hitting a floor in early March, and is up 21 percent for the year, on track for its best yearly gains since 1997. Last year, the index lost more than 31 percent.

Banks were also in demand, partly underpinned by the minutes showing a unanimous vote from the Bank of England to retain its loose monetary policy.

HSBC, Royal Bank of Scotland and Standard Chartered were up between 1.1 percent and 2 percent.

All nine members of the Bank's Monetary Policy Committee voted to keep interest rates at a record low of 0.5 percent and maintain the 200 billion pound asset buying programme in December, as expected.

Earlier, the Daily Mail reported, citing sources, that the Bank is prepared to expand its quantitative easing programme to ensure economic recovery is sustained.

"I wouldn't be surprised if we see further action. The country's not yet out of recession and with an election looming the government will need to be seen to be doing something" said Jimmy Yates, head of equities at CMC Markets.

On the downside, BT Group fell after trading ex-dividend.