LONDON The FTSE 100 was lifted on Monday by strength in energy stocks and food retailers, but the index was still struggling to break through the four-and-a-half year highs hit at the start of February.
London's blue chip index gained 13.13 points, or 0.2 percent at 6,277.06, holding within the 70-point range of the last five days and below the psychologically important 6,300 level.
"We have had such a strong run it is healthy to pause for breath and I am still in the camp that this is just a pause before we move on a bit further," James Burns, fund manager at Smith & Williamson, said.
"If you look at the last ten days or so the market tries to drop off a bit and within a day it has rebounded, so it seems as though there's money waiting to get in and people do not want to wait for a five percent drop because it is not getting there," he said.
Energy shares finished the day strongly with heavyweight Royal Dutch Shell rising 1.0 percent after BP backed a move by the firm to head off a liquidity crunch in the Brent crude market.
Consumer staples such as food retailers added 4.5 points to the FTSE 100 with Tesco up 1.5 percent after Exane BNP Paribas upgraded the firm to "neutral" from "underweight" on valuation grounds, and saying that downside risks have also been reduced.
Online grocer Ocado jumped 7.5 percent, extending recent gains following its trading update last week and on rehashed talk of a large retailer without online presence possibly making a bid for the company.
"There has been talk doing the rounds for while that someone like Morrisons (without an online presence) potentially bidding for Ocado, but the positive update last week has forced many bearish houses to turn more positive on the stock," a London-based trader said.
Wm Morrison shares rose 2.4 percent. Ocado, meanwhile, remains heavily shorted, with 77.5 percent of lendable shares out on loan as of February 7 - the highest utilisation rate for any FTSE 250 company, according to Markit data.
HITTING THE BARRIER
The gains were not enough to push the FTSE 100 through the 6,300 barrier, a level which it has failed to close above since the end of January.
"Upward support remains and as long as the FTSE 100 can close above 6,300 it can start to attack the recent highs of 6,362, but I do not see that happening this week," a London-based technical analyst said.
The deadlock in the U.S. over budget reform and political elections in Italy and Germany over the months ahead are among the main macro worries keeping indexes from pushing higher.
"In this environment, we continue to favour qualitative companies and funds," Rob Burgeman, director at Brewin Dolphin Investment Management, said in a note to clients.
"Well diversified portfolios should continue to offer investors excellent potential for growth in both capital and income over the medium term, notwithstanding the inevitable squalls along the way," he said.
Financials - a broad based sector including banks, insurers and asset managers - added 5.6 points to the FTSE 100.
Barclays rose 1 percent with the Financial Times reporting the bank was seeking to cut spending by 2 billion pounds - a tenth of its annual cost base - ahead of results on Tuesday.
Among the insurers Admiral Old Mutual and Prudential and Resolution rose as much as 1.7 percent after BofA Merrill Lynch said it remained relatively bullish on those UK names despite a strong performance in 2012.
On the downside, chip designer ARM shed 1.7 percent losing ground after a rally that had sent it to a 12-year high, with traders citing a large sell-order from an institution as the principal reason for the stock's decline.
European data centre operator Telecity fell 4.2 percent in good volume with traders citing caution heading into the firm's full-year results due out on Wednesday, with Liberum recommending investors to go short on the stock as 2013 and 2014 estimates look vulnerable to downgrades.
(Written by David Brett; Editing by Toby Chopra)