LONDON (Reuters) - The FTSE 100 ended higher in thin trade on Wednesday as heavily weighted bank shares rose on hopes of monetary easing in Europe, although it pared gains after weaker-than-expected U.S. data.
The FTSE 100 closed up 21.17 points, or 0.3 percent, at 6,451.29 points, rising on the first day of the month for the 10th straight time. Trading was quiet as most European bourses were shut for a public holiday.
Expectations of action to boost growth, in particular an anticipated European Central Bank (ECB) interest rate cut, has helped the FTSE rise more than 3 percent from mid-April lows.
The banking sector, a major beneficiary of cheaper borrowing, rose 0.7 percent, adding the most points to the index and taking sector gains since April 18 to 6.3 percent.
"There certainly seems to be a 25 basis point cut (from the ECB) priced in now, so if that didn't happen, I'd be very surprised if we didn't see a correction in the market," James Butterfill, global equity strategist at Coutts, said.
Before the ECB's decision on Thursday, markets will also be digesting the latest monetary policy meeting of the U.S. Federal Reserve. The Fed is expected to keep rates on hold.
Top individual gainer was BT, up 3.4 percent, with traders citing hikes to the stock's target price from Oriel and Nomura to 330p and 360p respectively. BT closed at 285p.
The index pared gains and briefly turned negative after several U.S. data reports missed expectations, weighing on growth-sensitive stocks.
U.S. companies hired the least employees in seven months in April while manufacturing growth slowed, data showed.
"The U.S. has disappointed, and Wall Street is down a bit so we're coming off on the back of that," Zeg Choudhry, head of trading at Northland Capital Partners, said.
Commodity-related stocks, which had been among the morning's top gainers, took 2 points off the index by the close, having recovered from intraday lows.
Also on the downside, the FTSE's top fallers all traded without entitlement to their latest dividend payout: Admiral Group, Barclays, Croda, ITV, Reed Elsevier, and Weir Group shaved 2.91 points off the index by Reuters calculations.
Editing by Louise Ireland