* FTSE 100 up 0.3 percent
* Banks up after U.S. banks' stress tests
* L&G higher as full-year results beat forecasts
By Tricia Wright
LONDON, March 14 (Reuters) - Britain's top shares rose on Wednesday as a more upbeat global economic outlook and robust corporate earnings placed the FTSE 100 index within striking distance of the psychologically key 6,000 level, a breakthrough which could signal more gains.
The FTSE 100 was up 20.28 points, or 0.3 percent, at 5,976.19 by 1230 GMT, although volumes were thin, at 53 percent of the 90-day daily average.
Traders said if the index manages to clear the 6,000 level, this puts it within sight of last year's highs of 6,100.
Brightening the mood, the U.S. Federal Reserve improved its outlook on economic growth for the world's largest economy on Tuesday and said most large U.S. banks had passed their annual stress tests.
Banks were the standout gainers on the FTSE 100 index on Wednesday as the news was met with enthusiasm by investors already heartened by Tuesday's upbeat German and U.S. data.
"The tone out of the Fed last night was fairly positive for risk -- they didn't implicitly say that they were going to do QE -- if anything they rode back from it -- but I think the market thinks, Well it's a no-lose situation," Michael Hewson, market analyst at CMC Markets, said.
"If the economic data's good then markets are going to go up and if it's not, the Fed's ready to step in and it will go up anyway."
Insurers also fared well, led higher by Legal & General which rose 4.2 percent to top the FTSE 100 leader board after it unveiled forecast-busting full-year profits and hiked its dividend by more than a third.
"L&G has reported a very good set of FY results this morning with higher than expected cash and dividend the main highlights," BofA Merrill Lynch said in a note, repeating its "buy" rating on the stock.
Merrill said that L&G shares have performed well in the year-to-date, rising around 20 percent, and that it expected the stock's re-rating to continue.
Peer Prudential, which posted solid earnings on Tuesday, firmed 3.2 percent as Nomura hiked its target price for the firm, to 740 pence from 700 pence.
Earnings momentum, or the pace of downgrades -- in the past a good indicator of changes in the equity market direction -- is starting to slow, providing investors with another reason to be optimistic.
"We're in the positive camp," Robert Parkes, equity strategist at HSBC, said. "We feel that we're through the worst now in terms of the earnings downgrade cycle."
Companies trading ex-dividend on Wednesday took the sheen off the FTSE 100's gains, knocking 6.86 points off the index, with the most impact coming from HSBC.