By Alistair Smout
LONDON (Reuters) - Britain's top share index rose for the eighth straight session on Monday, led by G4S on talk of a bid for one of its businesses in a market supported by the prospects of U.S. monetary policy remaining ultra-easy for longer.
G4S rose 3.5 percent, a top riser, after a newswire report that British private equity group Charterhouse Capital Partners was considering a 1 billion pound ($1.6 billion) offer for G4S's cash solutions business.
The FTSE 100 index closed 31.62 points higher, up 0.4 percent to 6,651.86 by 1440 GMT, and is around 2.7 percent off May's closing high for the year, which was a 13-year peak.
The index has risen around 5 percent in the last seven days after hitting its lowest since July, with demand supported by expectations the Federal Reserve will keep its stimulus in place for the time being following the U.S. fiscal standoff.
The index extended gains in the afternoon after U.S. data showing slowing house sales, supporting the view that the market anticipates continued easy monetary policy to counteract recent economic uncertainty.
"All eyes are back on the 'will they, won't they' question of Fed tapering, and I think the likelihood is that they don't taper this year," Joe Rundle, head of trading at ETX Capital, said.
"They won't taper while they're worried about the shutdown effects, and we're back to the situation where bad data is good and good data is bad."
The housing data was the first in a flood of U.S. data this week, delayed by the 16-day government shutdown, with particular market focus on jobs numbers on Tuesday.
Fund flow data backed up the view that equity-friendly central bank bond purchases would continue to support the asset class, as equity funds posted their biggest weekly inflow since mid-third-quarter 2011, according to EPFR data.
The start of the earnings season has also delivered support to equities, with 63 percent of firms in Europe that have reported so far beating expectations.
"Earnings remain positive and trends on forward looking estimates suggest we have scope to move higher on inflows on improving investor sentiment," Atif Latif, director of trading at Guardian Stockbrokers, said.
"We still see a push higher move into the year end and remain confident that we will see at least a 5-7 percent move to the upside from current levels"
RBS was the top faller, down 5.3 percent amid uncertainty over the future make-up of the part state-owned UK lender. The Daily Telegraph reported on Friday that chancellor George Osborne was considering breaking up the bank.
"I think there might be a suspicion that the ‘bad' assets might get flogged on the cheap, and that restrictions placed on the ‘good' bank might be a barrier to... profitable business in future," Matt Basi, senior sales trader at CMC, said.
"In brief, any time politicians start getting involved in pricing up the assets of listed companies, there is reasonable cause for concern."