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* Banks top gainers on FTSE 100
* A.G. Barr falls as annual profit slumps
* Royal Mail rises on dividend payment
* FTSE 100 up 0.5%, FTSE 250 adds 0.7% (Updates to close)
By Shivani Kumaresan and Amal S
March 30 (Reuters) - Banks and mining stocks lifted British shares on Tuesday amid investor optimism around a vaccine-led economic recovery, while Royal Mail climbed after announcing a one-off dividend payment.
The blue-chip FTSE 100 index .FTSE ended 0.5% higher, with bank and mining stocks including HSBC Holdings HSBA.L , Barclays BARC.L , Prudential Financial (NYSE: PRU ) PRU.L , Rio Tinto RIO.L , Anglo American (JO: AMSJ ) AAL.L and BHP BHPB.L among the biggest gainers.
Further gains were capped by weakness in defensive plays including consumer staples, healthcare and utilities.
"Two recent worries for the market seemed to have eased on Tuesday with the Suez Canal finally unblocked and concern over the Archegos family office saga beginning to die down," said Russ Mould, director at AJ Bell investment.
"The problem for markets is that recovery brings with it other risks – notably inflation – while clearly a renewed pandemic-inspired downturn would also be bad news for stocks."
The FTSE 100 has rebounded more than 38% from a coronavirus-driven crash last year, but has struggled to reach pre-pandemic highs due to lockdown measures that have curtailed economic activity and rising concerns around inflation.
Royal Mail RMG.L added 2%, after saying it would pay a one-off dividend for the year ending March following recent upgrades to its financial outlook on the back of a surge in parcel demand during the pandemic and a recent pick-up in letter volumes. adding to the recovery hopes, Catherine McGuinness, policy chair at the City of London Corporation, told BBC Radio she was confident that trade would return for cafes, pubs, restaurants and other businesses as most workers are likely to return to their offices after the pandemic. domestically focused mid-cap FTSE 250 index .FTMC climbed 0.7%, led by industrials stocks.
A.G. Barr BAG.L , best known for Scottish fizzy drink Irn-Bru, fell 6.7%, after a 30.5% slump in full-year profit, as coronavirus-led restrictions imposed last December weakened sales in pubs and sapped demand for its products.
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