By Bansari Mayur Kamdar
(Reuters) -UK shares rose on Thursday as markets globally rallied following two research studies that suggested the effects of the Omicron coronavirus variant were less severe than the Delta variant.
The blue chip FTSE 100 ended 0.4% higher, extending its two-day rally, led by financial stocks with banks advancing 1.0% as UK gilt yields picked up.
"The risk sentiment is still there but investors want to see the glass half full," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
"Though, the sentiment is still fragile and vulnerable to any piece of negative news that could just come and change the direction of the wind very rapidly."
Gains on the benchmark index were capped by a weakness in dollar-earning companies such as British American Tobacco, which fell 1.9% on a strong pound.
"Given that the volumes are relatively thin, there is very little narrative to really sort of cling onto or trade on," said Justin McQueen, market analyst at DailyFX.
The domestically focused mid-cap index added 0.8%, with the travel and leisure index among the lead gainers on easing concerns about Omicron.
Two separate studies in South Africa and London on Wednesday suggested the risk of hospitalisation from the Omicron variant was much less than with the Delta variant.
British car manufacturers had their slowest November in 37 years as the sector struggled to cope with the pandemic's impact on global supply chains, industry data showed.
The automobiles and parts index has underperformed the other sectors and the benchmark index so far this year, shedding nearly a quarter of its value, compared to a 13.6% recovery in British mid-caps.
Businesses have reported their weakest growth since the country was under lockdown earlier this year and they expect a further slowdown in early 2022, the Confederation of British Industry said on Thursday.
Online betting firm Flutter Entertainment rose 2.1% after saying it would buy Italian gaming operator Sisal for 1.62 billion pounds ($2.16 billion).
(Reporting by Bansari Mayur Kamdar and Amal S in Bengaluru; Editing by Vinay Dwivedi, Krishna Chandra Eluri and Pravin Char)