LONDON MARKETS: London Stocks Rise, As Banks, BP Lead

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- London stocks closed higher on Tuesday, driven by banks and more data confirming the U.K. economic recovery.

The FTSE 100 index rose 0.4% to end at 6,755.45 after the index closed slightly higher on Monday.

In the banking sector, Lloyds Banking Group PLC (LYG) rose 3% and HSBC Holdings PLC (HSBC) gained 2.4%. Royal Bank of Scotland Group PLC (RBS) rose 1.8% and Barclays PLC (BCS) gained 1.2%.

Euro-zone data showed the annual rate of inflation fell across the region and further below the European Central Bank's target in December, prompting some speculation that the central bank may need to address falling prices, or maybe try to stimulate the economy further. Banks have been a key beneficiary of easy money policy by central banks.

U.K. data showed new car sales surging 11% in 2013 versus 2012, the best year since pre-recession 2007, said the U.K. Society of Motor Manufacturers and Traders. Sales for December rose 24%, the 22nd-straight monthly rise.

Oil prices rose Tuesday as a portion of the U.S. remained locked in bitter cold, with BP PLC (BP) up 1%.

Broker moves triggered action for several stocks.

Shares of Severn Trent PLC fell 2.2% after J.P. Morgan Cazenove downgraded the water company to underweight from neutral. It cited concerns about rising regulatory risks, and a decreasing likelihood of mergers and acquisitions activity.

Away from the main index, retailer Debenhams PLC fell 0.5% after HSBC cut it to neutral from overweight, citing a poor Christmas sales season. HSBC lifted fellow retailer Next PLC to overweight from neutral, but retailers across the U.K. remained under pressure. Next shares fell 0.7%, while Wm Morrison Supermarkets PLC lost 1.1%.

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