Stronger commodity prices, optimism about the next round of US corporate results and talk that the FTSE 100 could be embarking on yet another rally, lifted the index to a fresh one-year high yesterday.
Following broad-based gains and a buoyant opening on Wall Street, the FTSE 100 ended up 48.2 points, or 0.9%, at 5210.2, the highest since late September 2008.
The fact the rally was, for once, not driven by mining firms and banks was coupled with a decisive move through the 5200 point. That led to speculation over this being the start of the next move higher for shares, after some directionless trading over recent weeks, said David Jones, chief market strategist at IG Index.
"It is only natural after a run like this that we start to wonder how far away a correction is, but for now stockmarkets are continuing to shrug off any weakness and slides are proving to be short-lived. The next FTSE target traders are eyeing in the short term is the 5350 high hit in September last year – and the way sentiment is going it would not be a surprise to see that hit this week."
Insurer Old Mutual was the top performer, rallying to a 16-month high as investors made the most of a weak run against its peers to buy into the stock. A weaker pound helped, given the proportion of Old Mutual's earnings outside Britain. The shares ended up 4.8p, or 4.6%, at 110.1p.
AMEC, the consultancy and engineering group, rose after broker Collins Stewart made it a "top pick" in the oilfield services sector. Analyst Gordon Gray rates it a "buy" and has a target price of 950p. "We think AMEC offers one of the best combinations of healthy growth and low risk in the sector, with its exposure to oil sands and nuclear being key long term positives," he said.
Rising metal prices boosted miners, with Vedanta one of the top risers, up 61p at £22.23. A solid rally for oil prices helped energy companies and BP added 9.7p, or 1.8%, to 552.2p.
Among the midcaps, ITV was up 0.95p, or 2.1% at 47.33p despite the latest upset in the broadcaster's quest to fill its leadership vacuum. Goldman Sachs boosted the shares by raising its recommendation to buy from neutral. Analysts at the investment bank noted "evidence of modestly stronger than expected recovery in third-quarter and fourth-quarter TV ad markets". They have a 58p price target.