FTSE maintains rally as Vodafone gains

By Simon Falush

LONDON (Reuters) - Britain's leading share index gained 0.4 percent on Monday, adding to its post-Christmas rally, with Vodafone in demand, and oils firmer, outweighing a fall in defensive pharmaceutical and tobacco stocks.

The FTSE 100 ended 17.85 points higher at 4,579.64, its highest close in two months, after rising 8.2 percent in a four-session winning run last week.

The UK benchmark last year suffered its biggest annual drop since its launch in 1984, falling 31 percent.

Index heavyweight Vodafone provided the biggest boost for the FTSE 100 index on Monday, up 4.4 percent, extending its recent strong run to reach its highest since September after Credit Suisse tagged the mobile phone group as a "trading buy" on December 31.

"The gut feeling is that that maybe markets were over-doing the gloom towards the end of last year," said Peter Dixon, UK economist at Commerzbank.

"They are testing the upside a little to see if there's any substance to whether stocks were oversold, but there's lots of scepticism, which I share, about whether (the rally) is sustainable."

Oil stocks also moved higher as crude prices pushed back above $47 a barrel, lifted by concern about Israel's offensive in the Gaza Strip and the Russian gas supply row.

BG Group, BP, Cairn Energy, and Tullow Oil added between 1.3 and 4.1 percent.