LONDON, Dec 9 (Reuters) - Britain's leading share index rose 1.9 percent on Tuesday, led by energy stocks and financials as investors shrugged off a raft of grim economic data from the UK.
The FTSE 100 .FTSE closed 81.2 points higher at 4,381.26, after trading as high as 4,412.96 during the session to touch its highest level since Nov 10. The UK index had rallied 6.2 percent on Monday but is still down 32 percent this year.
More than 1.1 billion changed hands on the FTSE 100 on Tuesday, compared with Monday's 1.24 billion and last week's daily average of 1.24 billion.
"This is a bear market rally. We don't see a great deal of upside beyond 4,500 and we would expect there will be some short-term profit taking in the near future," said Tim Whitehead, head of portfolio services at Redmayne-Bentley. "I don't think it's time to be drawn back into equities en masse."
Oil shares contributed the most points to the index, with BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz), BG Group (BG.L: Quote, Profile, Research, Stock Buzz) and Cairn Energy (CNE.L: Quote, Profile, Research, Stock Buzz) gaining between 3.1 and 7.3 percent.
Insurers were again in demand after the previous session's sharp rise, having been badly hit recently by the slide in equity markets on valuations and concerns over the impact of a recession.
Prudential (PRU.L: Quote, Profile, Research, Stock Buzz), Old Mutual (OML.L: Quote, Profile, Research, Stock Buzz), Aviva (AV.L: Quote, Profile, Research, Stock Buzz) and Legal & General (LGEN.L: Quote, Profile, Research, Stock Buzz) strengthened between 4.6 and 13.5 percent.
On the economic front, British factory output shrank sharply in October, property sales are at a record low and the Christmas season is failing to ignite retail sales as evidence grows that the UK is entering a long and painful recession.
Sterling fell on the gloomy data, but the FTSE 100 shrugged off the bad news.
Investors said the ailing health of the economy would force the Bank of England to cut rates further, and the government to increase spending once again.
"Markets have come down a long way, so expectations are very low," said Grahame Exton, investment director at Tilney Fund Management.
"The rate reinforces a view that there will be more reflationary measures and more rate cuts, so people are looking through the bad news as a forerunner to more good news."
