The FTSE 100 posted the third highest close in its history as a fall in US inflation boosted the outlook for the global economy.
On a bumper day of trading, it rose 0.9 per cent, or 69.06 points, to 7794.04, just shy of the 7800 mark it has only topped twice before.
It is now within touching distance of its record close of 7877.
The gains were mirrored on the FTSE 250, which added 1.6 per cent, or 319.43 points, to 19841.13.
The rally came amid mounting hopes that the worst of the inflation crisis has passed, allowing central banks to slow the pace of interest rate hikes.
In the US, the rate of inflation fell for a sixth month in a row, at 6.5 per cent in December – the slowest rate since October 2021. That was down from 7.1 per cent in November and 9.1 per cent in June.
Analysts said the figures could persuade the US Federal Reserve to slow the speed at which it raises interest rates after the steepest increases since the 1980s.
A 0.25 percentage point rise is now on the cards next month following a string of 0.5 and 0.75 percentage point hikes.
Danni Hewson, a financial analyst at AJ Bell, said: ‘December’s rise was the smallest in over a year and if you take the month in isolation the picture is even brighter.
‘Overall, this must be seen as a glass half-full moment and with investors seeming ready to fully commit to a New Year rally, the optimists are likely to drown out the pessimists today.’
Stock Watch – Portmeirion
Pottery firm Portmeirion said it has cashed in on a positive festive period.
The maker of Royal Worcester porcelain said sales for 2022 would total at least £110million, 4 per cent higher than 2021.
Profit should also be 10 per cent above the previous 12 months, the company said.
Portmeirion put its strong performance down to progress made in the US and South Korea.
The group has expanded its global reach, with 75 per cent of sales now outside the UK. It rose 17.1 per cent, or 55p, to 377.5p.
Back in London, Persimmon became the latest housebuilder to warn that rising mortgage rates are hitting demand.
The FTSE 100 giant revealed sales dropped to 0.3 per outlet per week in the fourth quarter, compared to 0.77 in the same period last year.
Concerns over the economy, mortgage rates and the cost of living ‘weighed heavily on consumer confidence’, Persimmon said.
The comments echoed those of rival Barratt just a day earlier.
Persimmon shares rose 8.3 per cent, or 108p, to 1404.5p while Barratt climbed 6.7 per cent, or 28.3p to 451.2p.
Strong demand for budget hotels over Christmas boosted business at Premier Inn.
Owner Whitbread said UK revenues at the chain were 25 per cent higher in the five weeks to January 5 than the same period a year earlier.
It followed a 23.8 per cent rise in the 13 weeks to December 1. Whitbread rose 5.8 per cent, or 165p, to 3020p.
Over at Savills, the estate agent warned that the first half of this year will be ‘more challenging’ than the previous 12 months.
But there was much to cheer, with the group beating expectations for 2022. Shares rose 4.8 per cent, or 42p to 912p. Trustpilot enjoyed a stellar day following the customer review website’s upbeat outlook on profit.
Revenue for 2022 is likely to have increased by 13 per cent to around £122million. Profit should be above expectations. It jumped 24.9 per cent or 23.25p to 116.6p.
Pub group Mitchells & Butlers enjoyed a fruitful festive period as the All Bar One owner’s sales rose 10.4 per cent in the 15 weeks to January. It soared 4.9 per cent or 8p to 170.7p.
There was good news for ProCook. The cookware retailer surged 4 per cent, or 1.15p, to 29.65p despite revenue sliding 2.5 per cent to £22.4million in the 12 weeks to January.
But the final four weeks saw revenue up 2.9 per cent on the previous 12 months.
Hurricane Energy emerged victorious after its largest shareholder Crystal Amber withdrew calls for a general meeting to oust the board of the oil and gas firm.
Crystal Amber, which holds a near 29 per cent stake, backtracked after Hurricane this week said it was making real progress on finding a buyer. Shares rose by 1 per cent, or 0.08p, to 8.27p.