About £33billion was added to the value of UK blue-chip shares today as relief over the US “fiscal cliff” deal sent the FTSE 100 index shooting past 6,000 for the first time since July 2011.
World markets started the new year with a bang as investors cheered moves by politicians to pass short-term measures preventing devastating tax rises and spending cuts that had threatened to derail America’s economy.
London’s top tier closed 2.2% higher, up 129.6 points at 6,027.4 after its New Year break, while the Dow Jones Industrial Average on Wall Street rallied 1.7% in early trading.
Markets across Europe also powered ahead, with Germany’s Dax up 2% and the Cac 40 in France up 2.6%.
A surprise boost for Britain’s manufacturing sector added to the rally in London after a closely-watched survey revealed a return to growth in December.
The fiscal cliff agreement was sealed just hours before world markets were due to return from the New Year holiday .
London’s main market had been in limbo in recent sessions as traders pondered the implications of failure in Washington DC.
Experts fear the market elation could be short-lived, however, with US politicians still to agree a long-term package of measures to reduce spending.
Johan Jooste, chief market strategist at Merrill Lynch Wealth Management, said America was “delaying decision-making rather than resolving the fiscal position”.
Joe Rundle, head of trading at ETX Capital, added: “It’s only a matter of time before market participants lose their buzz as US lawmakers will have to reconvene to address the remainder of unresolved issues.”
Banks and London-listed mining groups led the rally on the FTSE 100, with Barclays closing 5%, or 13.2p higher at 275.6p and Evraz gaining 7%, or 18.7p at 277.6p.
Grocer Morrisons was one of just three fallers in the top flight amid City speculation that it has endured a difficult Christmas trading period. Shares were 5.6p lower at 257.4p.
Larger rival Sainsbury’s was also feeling the heat, down 9.1p to £3.36.
Elsewhere, Middle East-based oil rig engineer Lamprell leapt 20% higher – up 19.25p to 113.25p – after winning vital breathing space from its lenders following trading woes that left it in breach of banking agreements.
Barry Shepherd, of investment manager and financial planning specialist Brewin Dolphin in Aberdeen, noted Amec up 4.3% to £10.46, Weir Group adding 4.8% to £19.70 and Premier Oil 5.6% higher at 5.6% at 355.8p. Faroe Petroleum shed 0.4% to 137.5p.