London’s premier index soared to a 16-month high and the pound came under pressure as Prime Minister Theresa May vowed to kick-start the Brexit process by the end of March next year.
The FTSE 100 Index reached its highest point since June 2015, up more than 1% to 6,986.74, as investors were handed greater clarity over when Britain will exit the EU.
However, the pound was waning on the currency markets, dropping to a three-year low against the euro amid concerns that Mrs May will opt for a “hard Brexit“ and leave the single market.
The announcement that Britain would begin the formal process of leaving the EU by triggering Article 50 in March 2017 also caused sterling to hit a three-month low against the US dollar.
However, the pound momentarily pared losses after output in Britain’s manufacturing sector reached its highest level for more than two years as the industry continued to bounce back from a post-Brexit vote slump.
The closely watched Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) said output hit 55.4 last month, up from 53.4 in August, and above economist expectations of 52.1.
Sterling was down 0.7% against the dollar at 1.287 US dollars and off 0.7% against the euro at 1.145 euros.
Andy Scott, economist at HiFX, said: “The data post-Brexit hasn’t just pointed to the economy maintaining what was a solid rate of gross domestic product (GDP) growth in the second quarter, there’s evidence that in some sectors activity is strengthening, including manufacturing, which of course benefits from a weaker pound.
“If Wednesday’s services PMI also improves, we may see sterling strengthen as this is the sector that most worry will be negatively impacted in the months ahead,” he added.
Across Europe, Germany’s Dax was up 1% and the Cac 40 in France rose 0.3%.
In UK stocks, oil majors were in the ascendency after the price of oil broke above the 50 US dollars a barrel mark after the Opec cartel said it had reached a deal last week to stabilise the market by slashing output.
Royal Dutch Shell B rose nearly 3% or 57.5p to 2054.5p after Brent crude climbed 1.1% to 50.73 US dollars a barrel. Rival BP was also 7.6p ahead at 457.7p.