LONDON The FTSE 100 rose on Monday, buoyed by gains for heavyweight banks as the sector tracked continental peers on expectations Spain was moving closer to asking for a bailout.
A 12.29 point, or 0.2 percent, move higher to 5,805.61 points was not enough to take the FTSE 100 out of its recent tight trading range, however, and the index remained a regional laggard in comparison to gains in Germany and France.
While traded volumes were towards the top of their recent range, at 90 percent of their 90-day daily average, absolute volumes remained low, traders said.
"Markets are paper thin at the moment. There isn't any conviction in their moves," said Zeg Choudhry, head of equities trading at Northland Capital Partners.
That lack of conviction has kept the FTSE in a tight 47 point range since the start of October, flirting with the trendline formed by the index's lows in June and August. On Monday it closed just below the trendline at 5,810 points.
British banks led sectoral gainers, up 1.3 percent, after a Reuters report that Spain could apply for a bailout in November supported sentiment towards the sector, adding further to a solid rally in the third quarter.
HSBC, up 0.9 percent, added nearly 4 points to the broader index, while peers including Barclays and Lloyds Banking Group also rose.
The sectoral performance was marred only by a 1 percent fall for Royal Bank of Scotland, hit after Spanish bank Santander withdrew from a deal to buy 316 branches from the UK lender late on Friday.
While markets across Europe have risen over the last three months as policymakers sought to create the toolkit to deal with a bailout of Spain and encourage regional and global growth, some feel the recent steady trade could give way to a pullback.
The FTSE 100 has added 5.6 percent since late July, against 7.9 percent for the FTSEurofirst 300 and 15.1 percent for the Euro STOXX 50.
"In our view, after a 16 percent rally European markets are probably at fair value, at least for the near term. There is also still potential for shocks between now and the year end," Karen Olney, equity strategist at UBS, said.
"Near term growth isn't looking great and with earnings expected to grow by 12.4 percent next year there is room for disappointment."
While money printing efforts by various central banks have acted to support stocks since the turn of the month, increasing concerns around the outlook for global growth weighed on commodity prices and caused mining shares to lag on Monday.
Mining stocks fell 0.9 percent and could face a further test later this week as growth data in China, the world's biggest consumer of metals, is expected to point to further slowdown.
In addition to the broader growth concerns, sector laggard Rio Tinto, down 1.4 percent, was also hit by a Goldman Sachs downgrade to "neutral" citing threats to its earnings outlook.
(Editing by Simon Jessop; editing by Ron Askew)