Improving newsflow in China and some better-than-expected economic data from the US helped the FTSE 100 come close to the 6,300 barrier on Monday, a level not seen since mid-2008.
"What seems to be an unrelenting grind higher has continued today, with fund manager's chatter of the big rotation being matched by positive data points and the market's appetite for risk," said David White, a financial trader from Spreadex.
The impressive 6.8% rise for the Footsie so far this month puts it on course to record its best January in 13 years, according to the Financial Times. However, there are some concerns that this rally may be short-lived, with the index's relative strength indicator already at technically 'overbought' levels.
Nevertheless, markets were able to hold on to recent gains with confidence about China's industrial profit potential providing some support. Stephen Green, the head of research for Greater China at Standard Chartered, said that Chinese industrial profits should rise by 30% in 2013 on average as a result of investment in infrastructure and real estate, improvements in export demand and looser monetary conditions. Meanwhile, economist Lu Ting from Bank of America Merrill Lynch expects profits to grow by 25% in the first half of this year.
Meanwhile, US durable goods orders increased by 4.6% in December, above the 0.7% gain the month before and well ahead of the 2.0% consensus forecast.
Markets rallied on the back of the release, as traders shrugged off disappointing US pending home sales figures this afternoon. Earnings figures from Wall Street heavyweight Caterpillar also came in below estimates, though a bullish outlook for the second half saw the shares
edge higher after the US opening bell.
FTSE 100: Banks gain after Goldman lifts targets
Banking stocks were performing well on Monday afternoon after Goldman Sachs raised target prices across the sector. Goldman labelled HSBC as a 'conviction buy' and upped its target price from 820p to 860p. Even RBS was making gains despite the US bank downgrading the stock to 'sell'. Nevertheless, the target was still lifted from 325p to 340p.
Barclays was also higher after Goldman raised its target price for the shares from 320p to 350p and kept its 'buy' rating. The latter, which is due to present its new strategic plans on February 12th, was shrugging off some gloomy comments from Credit Suisse today, which said it believes that it will be difficult for the bank to "transform" profitability.
Other financial stocks, such as Aberdeen Asset Management, Schroders and Standard Life were also registering decent gains today.
Heading the other way were resource stocks as traders looked to book profits after a decent performance over winter. Since the start of December, share prices
in the FTSE 350 mining sector have risen by around 10% on average (including today's fall). Fresnillo and Kazakhyms were both in the red by the close.
Outsourcing group Capita was a heavy faller this morning after Canaccord Genuity downgraded its rating for the stock from 'hold' to 'sell'. The broker said that the attractions of Capita's investment case have "diminished".
Similarly, sweeteners and food products firm Tate & Lyle was also down after Investec reduced its stance from 'buy' to 'hold' following a 29% share-price jump since mid-September. Tate's third-quarter results are due on February 1st.
FTSE 250: Home Retail hit by downgrade
Home Retail Group fell after Morgan Stanley downgraded the stock from 'overweight' to 'equal-weight', with a target price of 140p. Sector peer Debenhams was also lower after Morgan Stanley reduced its target price from 115p to 110p, downgrading it from 'overweight' to 'equal-weight'.
New World Resources also slumped today after saying that the price it could sell its thermal coal in 2013 had tumbled as the market was hit by oversupply. The company managed to negotiate an average price of €60 per tonne for 2013 thermal coal deliveries, representing a 19% fall on 2012 prices.
Meanwhile, software solutions group Anite jumped after acquiring the Propism channel emulation product set of Elektrobit Corp for €31m. Christopher Humphrey, Anite's Chief Executive said: "The product line we are buying is an excellent addition and a good fit with Anite's Handset Testing business and the acquisition is expected to be enhancing to adjusted earnings."
FTSE 100 - Risers
Barclays (BARC) 305.85p +1.71%
Aberdeen Asset Management (ADN) 422.00p +1.59%
Schroders (SDR) 1,942.00p +1.36%
Standard Life (SL.) 350.00p +1.24%
BAE Systems (BA.) 346.90p +1.08%
Reckitt Benckiser Group (RB.) 4,238.00p +1.02%
HSBC Holdings (HSBA) 717.10p +0.96%
RSA Insurance Group (RSA) 131.00p +0.77%
Royal Dutch Shell 'A' (RDSA) 2,281.00p +0.77%
Prudential (PRU) 954.50p +0.74%
FTSE 100 - Fallers
Evraz (EVR) 293.70p -2.10%
GKN (GKN) 241.50p -2.07%
Fresnillo (FRES) 1,663.00p -2.06%
BG Group (BG.) 1,142.00p -2.02%
ITV (ITV) 114.10p -1.47%
International Consolidated Airlines Group SA (CDI) (IAG) 220.00p -1.35%
Hargreaves Lansdown (HL.) 701.00p -1.27%
Petrofac Ltd. (PFC) 1,709.00p -1.21%
Tate & Lyle (TATE) 824.00p -1.20%
Tullow Oil (TLW) 1,169.00p -1.18%
FTSE 250 - Risers
Menzies(John) (MNZS) 727.00p +6.13%
Afren (AFR) 148.50p +3.77%
Atkins (WS) (ATK) 816.00p +3.62%
Anite (AIE) 145.80p +3.55%
Laird (LRD) 231.80p +3.48%
Telecom Plus (TEP) 973.50p +3.34%
Britvic (BVIC) 463.00p +3.23%
Wetherspoon (J.D.) (JDW) 512.50p +3.22%
SDL (SDL) 513.00p +2.76%
SIG (SHI) 136.90p +2.39%
FTSE 250 - Fallers
Home Retail Group (HOME) 124.00p -7.19%
Centamin (DI) (CEY) 56.35p -3.43%
BTG (BTG) 320.00p -3.21%
Debenhams (DEB) 102.20p -2.94%
Regus (RGU) 115.80p -2.85%
Petropavlovsk (POG) 359.50p -2.79%
Micro Focus International (MCRO) 616.00p -2.76%
Dignity (DTY) 1,162.00p -2.60%
New World Resources A Shares (NWR) 304.90p -2.56%
International Personal Finance (IPF) 405.20p -2.50%