LONDON (Reuters) - The top share index rose on Tuesday, as traders latched on to encouraging data from the United States while awaiting further news about the wider implications of a Cyprus bailout.
Financial and energy stocks were among the top gainers as investors sought to add equities, which rise and fall with optimism on the economy.
Demand for long-lasting U.S. manufactured goods surged in February and single-family home prices posted their biggest year-on-year gain in January in six-and-a-half years, fuelling demand for riskier British stocks.
The FTSE 100 companies derive nearly a quarter of revenues from the United States, and the news helped to distract attention from mixed signals out of the European Union over whether Cyprus set a template for the rest of the region.
"In the absence of any firm bad news over Cyprus, the market is pressing higher on the back of the back of decent data out of the U.S.," said Toby Morris, senior sales trader at CMC Markets.
"People are trying to get stuck into economic data which won't change a few hours later, instead of trying to pick up the pieces of the mixed messages out of the EU."
Stocks fell on Monday after the head of the Eurogroup of euro zone finance ministers, Jeroen Dijsselbloem, said that future rescue deals should first ask banks to recapitalise themselves, as in Cyprus, only to later say Cyprus was a specific case.
The European Central Bank also said Cyprus was a unique case, although the FTSE pared gains on Tuesday after an EU lawmaker said that the bloc's parliament would demand the involvement of big savers in deals to save troubled banks, like in Cyprus.
The FTSE 100 on Tuesday closed up 20.99 points, or 0.3 percent, at 6,399.37 points, finding direction in afternoon trade after a choppy morning session.
Banks rose 0.6 percent, gaining for the first time since March 14. They had lost 5.3 percent since the first plan to bail out Cyprus, which involved a levy on all deposits rather than just on large, uninsured ones, was unveiled a week ago.
"Banks have retreated over the last few sessions and with valuations remaining at the low end of historical valuations versus the market we see a compelling entry point for some UK financials," said Atif Latif, director of trading at Guardian Stockbrokers.
"The market remains in an uptrend and we still see long-term buyers entering the market on dips again."
Financials, a broad-based sector which includes banks, asset managers and insurers, added 9.8 points to the index, with Aberdeen Asset Management leading gainers.
Aberdeen rose 4 percent after price target increases from Credit Suisse, Morgan Stanley, Exane BNP and UBS following a trading update yesterday in which it announced inflows of 3.5 billion pounds ($5.3 billion) for the first two months of the year.
Shares in Britain's fourth-biggest grocer Wm Morrison Supermarkets also benefited from an upgrade, rising 3.5 percent after Citigroup upgraded its recommendation on the company to "buy" from "neutral".
The top faller on the FTSE was miner ENRC, which fell 3 percent, bringing its decline in March to well over 20 percent. Mid-cap peer Kazakhmys shed 8.6 percent after it said it had taken a $2.22 billion impairment on the value of its stake in ENRC.
(Editing by Pravin Char)