By Simon Falush
LONDON (Reuters) - Commodity stocks and banks pushed the top share index slightly higher on Thursday as proposed fiscal stimulus measures in the United States helped boost the outlook for the global economy.
By 11:15 a.m., the FTSE 100 was 19.58 points or 0.3 percent, higher at 5,814.11 after falling 0.2 percent on Wednesday.
A proposal by U.S. President Barack Obama to extend tax cuts has lifted optimism among some investors that the world's largest economy will deliver decent growth in 2011.
This helped lift metal and crude prices and boosted heavyweight commodity stocks.
Miners Lonmin (Lonmin PLC) and Kazakhmys (Kazakhmys PLC Ord 20p (WI)) added 2.8 percent and Eurasian Natural Resources (Eurasian Natural Resources COR) added 1.9 percent respectively while energy firms BG Group and Royal Dutch Shell (Royal Dutch Shell PLC 'A' Ord) gained 0.5 percent and 2.5 percent.
"It's a case of two steps forward and one step back, but there's a bit more confidence that there's some growth about and that's not a bad situation for equities," Neil Tong, head of UK equities at Alliance Trust said.
However he added that caution was likely to remain as government debt problems around Europe have yet to be resolved.
Banks were also mostly firmer, boosted by the improving risk appetite. Barclays (Barclays PLC) gained 2.3 percent while Lloyds Banking Group (Lloyds Banking Group PLC ORD 1) put on 1.2 percent.
Insurers were also stronger, with Prudential (Prudential PLC ORD 5P) adding 3.1 percent and Legal & General (Legal & General Group PLC ORD) up 2.2 percent.
Asia-focussed bank Standard Chartered was the top FTSE 100 laggard, however, down 2.9 percent, as the bank issued a trading update. Analysts highlighted cost growth exceeding income growth as a possible cause for investors' concern.
Smith & Nephew , meanwhile fell 2.3 percent, retreating after strong gains on Wednesday which were prompted by bid speculation.
BANK OF ENGLAND WATCH
The Bank of England's Monetary Policy Committee decision is due at noon. The Bank is likely to hold interest rates at 0.5 percent and keep the 200 billion pounds of asset purchases that has been in place since February.
Overall, appetite for equities seemed relatively firm with investors seeing them as attractive relative to other asset classes.
"There's a chance that we will see a switch in asset allocation out of sovereign debt into equities, said Tong at Alliance Trust.
British house prices posted their first annual decline in a year in the three months to November, and prices fell 0.1 percent on the month, mortgage lender Halifax said.
Across the Atlantic, weekly U.S. jobless claims data is scheduled for release at 1:30 p.m., with U.S. October wholesale inventories due at 3 p.m.
Technical indicators look supportive, analysts said.
"The market found buying activity well above the key technical support levels... and appears poised to retest the previous swing high... near 5,840," Jonah Ford, an analyst at Autochartist, said in a note.
(Editing by Erica Billingham)