Retail stocks were among the top risers, with Britain's biggest supermarket chain, Tesco (>> Tesco PLC), jumping 5.4 percent after data from Kantar Worldpanel showed its sales grew at the fastest rate in three years in its most recent trading period.

Shares in Morrisons (>> WM Morrison Supermarkets PLC) and Sainsbury's (>> J Sainsbury plc) rose 4.4 percent and 2.2 percent respectively.

"We are encouraged by the (12-week) market performance, the momentum of recent events, which may bode well for 2016 Christmas trade, and the overall rationality of the market," analysts at Shore Capital Markets said in a note, adding that they had an "overweight" rating on UK supermarkets.

Budget airline easyJet (>> easyJet plc) was another top gainer, climbing 5.3 percent after an update.

Though the airline reported a 28 percent drop in its pretax profit, its first decline since 2009, analysts said that it came in at the upper end of a range given in October.

"With profits thankfully at the higher end of guidance, easyJet’s main news today is about passenger yields and the outlook," Ken Odeluga, market analyst at City Index, said in a note. He said he agreed with the market view that easyJet's shares, which are down around 37 percent this year, have reached bottom.

Pharma stock Hikma (>> Hikma Pharmaceuticals Plc) also gained ground, rising more than 6 percent, the biggest gain on the FTSE 100. Morgan Stanley upgraded the shares to "overweight" late on Monday, citing an encouraging pipeline as well as a compelling valuation.

The blue-chip FTSE 100 index <.FTSE> closed 0.6 percent higher at 6,792.74 points.

The UK mid-cap index <.FTMC> rose 0.9 percent, led higher by a rise in oil stocks Tullow Oil (>> Tullow Oil plc) and Amec Foster Wheeler (>> Amec Foster Wheeler PLC).

Energy shares were the top sector performers, with the UK oil and gas index <.FTNMX0530> rising 3 percent. Oil prices gained around 2 percent on optimism that OPEC will agree later this month to cut production to reduce a supply glut.[O/R]

Shares in BP (>> BP plc) and Royal Dutch Shell both rose more than 2.5 percent.

However, mining shares lost ground following a drop in prices of industrial metals as traders cashed in gains after last week's dramatic price spikes triggered by Donald Trump's U.S. presidential election victory.

The UK mining index <.FTNMX1770>, which surged more than 10 percent last week following Trump's pledge to invest a huge amount on U.S. infrastructure projects, fell 4.6 percent.

Tuesday's moves halted a recent rotation into mining and financial shares from defensive equities with high yields such as utilities, which slumped in the previous session following a rally in bond yields.

British utility stocks rose as euro zone government bond yields dropped across the board after a six-week sell-off.

"Bond markets have soured on the prospect of Trump-led inflation, although the sell-off seems to have abated somewhat as investors pause for breath," Neil Wilson, analyst at ETX Capital, said.

"Reversals in the last week's moves in stocks and bonds are possible and we may be seeing the start of this today as gold firms and bond yields retreat a little. The great bond market sell-off may have run its course."

(Reporting by Kit Rees, editing by Larry King)

By Kit Rees and Atul Prakash