LONDON, (Reuters):

Britain's FTSE 100 index of leading shares scaled new six-year highs on Friday, propped up by a robust banking sector and multiple stock upgrades after a burst of earnings the previous day.

The FTSE 100 closed 36.4 points, or 0.57 per cent higher at 6,382.8, its highest closing level since December 2000, and notching up a 2.6-per cent rise since the start of the year.

Banking shares

Standard Chartered jumped 2.2 per cent and Northern Rock rose 2.1 per cent, with banking shares accounting for a quarter of the index's upside as traders said the Bank of England's decision to hold interest rates at 5.25 per cent on Thursday signalled inflation may be under control.

"One dare not put a one-word sell rating on anything scarcely in the market and so it just grinds very steadily higher, and that looks like the basis for the year as a whole," said Dan Bunting, European strategist at Dryden Wealth Management.

Merger and acquisition chatter also buoyed the market, with the world's largest listed hedge-fund company, Man Group, touching new record highs, up 3.6 per cent, and investment manager Amvescap tacking on 3per cent as traders cited vague market talk of a tie-up between the two.

Neither company was immediately available for comment.

Traders said many investors will look to the G7 Finance Ministers and central bankers' two-day meeting, which started on Friday in Germany, for any policy comment which may affect the markets.

UPGRADES FLURRY

Several stocks climbed after broker upgrades following a flurry of results on Thursday. Pharmaceutical giant GlaxoSmithKline rose 2 per cent after WestLB raised its rating to "add" from "hold", and Rolls-Royce gained 3 per cent after several investment banks lifted their price target on the aeroengine maker.

Oil stocks also helped support the market, with BP up 0.6 per cent after U.S. crude oil broke through the psychological $60 a barrel level for the first time in more than a month, spurred by tighter supplies and worries about rising tension between the United States and Iran.

Oil explorer BG Group added 1.9 per cent and hit its highest level since May 2006 after several broker upgrades followed its upbeat results on Thursday.

Miners also featured on the upside on steady to higher metal prices, with BHP Billiton and Xstrata adding 1.6 and 1.3 per cent respectively.

On the downside medical devices firm Smith & Nephew lost 1 per cent after UBS cut its rating and following strong gains in the stock on Thursday.

Vodafone lost 0.8 per cent after a Credit Suisse rating cut. Potential suitors in a multi-billion-dollar bid battle for India's Hutchison Essar, for which Vodafone has expressed an interest, are due to submit bids on Friday.