Fresh optimism over economic recovery prospects ensured the London market started the new year in the same fashion it ended 2009.
The FTSE 100 Index pushed to a 16-month high, climbing 33.2 points to 5446.1 by mid-morning as oil ticked above $80 a barrel and commodity-based stocks continued to show strength.
Investors were encouraged by a report showing the manufacturing sector’s best performance in more than two years, while figures from the Bank of England suggested its quantitative easing programme was having an impact.
Elsewhere, a multi-billion dollar move by Basel-based drugs firm Novartis for the Alcon eye care business currently majority-owned by Nestle fuelled hopes of a revival in merger and acquisition activity during 2010.
There was also cheer from Japan’s Nikkei which rose 1% to its highest close since October 2008 as a weaker yen looked helpful for exports.
Although there was little corporate news to drive stocks, oil and gas firm Cairn Energy led the risers after securing a second rig for its Greenland drilling programme. Shares rose 18.9p to 351.4p or 6%.
Retailers were also doing well after broker upgrades from Societe Generale and Credit Suisse as well as early signs of decent Christmas trading.
Argos firm Home Retail Group was up 8.4p to 290.9p after SocGen said it expected improved trends at Homebase, the DIY chain it also owns.
Meanwhile Kingfisher – owner of rival B&Q – was 4.7p better at 233.7p as it benefited from Credit Suisse marking up ratings on a host of European non-food retailers.
Marks & Spencer was 4.3p ahead at 406.3p. Analysts expect the first like-for-like sales growth in more than two years on Wednesday when the firm kicks off the Christmas reporting season.
Property firms dominated the fallers board after a strong run over the festive period. Hammerson slipped 12.2p to 411.8p and British Land fell 11.2p to 468.8p.