Banks and oils lead FTSE to close up

By Dominic Lau

LONDON (Reuters) - The top share index ended up 0.7 percent on Friday as optimism that banks had seen the worst of credit-related writedowns lifted the sector and oil stocks tracked higher crude prices.

The FTSE 100 .FTSE closed up 40.7 points at 6,091.4, for a weekly gain of 0.5 percent. The blue-chip index underperformed Frankfurt's DAX .GDAXI and Paris's CAC-40 .FCHI.

"It has been quite encouraging. It had a volatile week but held on to gains made from last week of above 6,000," said Angus Campbell, head of sales at Capital Spreads.

"We really need to see the market push beyond 6,100. We have seen a few sellers at that level. If we don't get a concerted effort above that, it would just prove the downward trend is still intact," he said.

Beaten-down banks were the top sectoral gainer, with HBOS HBOS.L, HSBC (HSBA.L), Barclays (BARC.L), Royal Bank of Scotland (RBS.L), Alliance & Leicester ALLL.L and Lloyds TSB (LLOY.L) up between 0.5 and 4.4 percent.

UBS said in a report that it had upgraded the global banking sector to "neutral", citing improvements in credit markets, increased government intervention, a near-end to mark-to-market writedowns and fundraising by banks.

Also in the financial sector, ICAP (IAP.L) and London Stock Exchange (LSE.L) put on 4.1 and 3.6 percent respectively.

Oil shares turned positive as crude prices CLc1 traded just above $119 a barrel after reports that a ship contracted by the U.S. military fired at least one warning shot toward an Iranian boat.