After a subdued morning session, the FTSE 100 rallied in afternoon trade to finish at its highest level since early 2008, helped by upbeat earnings from corporate heavyweights in the US.
The Dow Jones Industrial Average in New York was also trading at a five-year high today after pharmaceutical group Pfizer, refiner Valero Energy and home-builder DR Horton all topped analysts' estimates.
The FTSE 100 has extended gains seen since the start of 2013 and has now risen around 7.5% in January alone.
According to technical analyst Bill McNamara from Charles Stanley this afternoon: "the UK index is overbought (its 14-day relative strength index is now above 80%) but that in itself does not represent a sell signal in a strong bull phase and it now looks pretty likely that we will see a test of the May 2008 peak, at 6,376, before this move reaches any kind of conclusion."
However, he warned that a correction - "when it comes" - will probably be "fairly sharp" after the Footsie's recent strong run.
The markets' focus is now starting to turn to tomorrow's economic growth data and a policy rate decision in the US. The world's biggest economy is expected to have grown at an annualised rate of 1.1% in the fourth quarter of 2012, according to preliminary estimates, well below the 3.1% growth in the third quarter.
Meanwhile, while the Federal Open Market Committee (FOMC) meeting is expected to be a "complete non-event", according to Jefferies, traders will keep an eye on any comments regarding the length of the current asset purchase programme.
FTSE 100: RBS hit by LIBOR concerns, downgrade
in Royal Bank of Scotland were being hammered on Tuesday by concerns about a regulatory fine relating to alleged LIBOR manipulation, the stock was being weighed down further by a downgrade by Espirito Santo to 'sell'. Lloyds was also taken down a peg by the broker in its review of the UK banking sector.
Diversified mining group Anglo American gained despite saying it will recognise a $4.0bn impairment charge in its 2012 results after completing a detailed cost and schedule review of its Minas-Rio iron ore project in Brazil. The gain appeared to be part of a wider trend, with sector peers Evraz, Rio tinto, Antofagasta and BHP Billiton all making strong gains.
Anglo-Dutch oil mammoth Shell was also higher following reports that it could be close to buying the liquefied natural gas (LNG) business of Spanish company Repsol.
BT Group dropped after Bank of America cut its target price on the stock from 285p to 265p, downgrading it to 'neutral' from 'buy'.
FTSE 250: Investec given boost by Morgan Stanley upgrade
Investec was a high riser after being boosted by Morgan Stanley's decision to upgrade the stock to 'overweight'.
Bookmaker William Hill was also a high riser after saying its good performance continued into its final quarter after strong trading in retail and online. Net revenue grew by 12% in the 53 weeks to January 1st while operating profit was up 20%.
3i, the international investor focused on mid-market private equity, has told the market that Sherborne Investors, which describes itself as a 'turnaround investment firm', has built up its stake in the FTSE 250 company, causing shares to rise.
Consumer products giant PZ Cussons fell despite posting a rise in profits in line with market expectations. The company, which owns Original Source shampoo, Morning Fresh washing up liquid and Imperial Leather soap, reported a 9.7% increase in profits before tax of £44.1m for the six months to November. Panmure Gordon said that results were in line with forecasts.
Miner Centamin was a big faller as a result of reports of violence in Egypt. Meanwhile, diamond producer Petra also dropped despite reporting a 54% rise in first-half revenue.
FTSE 100 - Risers
Anglo American (AAL) 1,929.50p +3.04%
Kazakhmys (KAZ) 766.50p +2.89%
Evraz (EVR) 301.90p +2.79%
SSE (SSE) 1,423.00p +2.01%
Rio Tinto (RIO) 3,575.50p +1.98%
BHP Billiton (BLT) 2,151.00p +1.87%
Imperial Tobacco Group (IMT) 2,466.00p +1.77%
Centrica (CNA) 351.50p +1.71%
Petrofac Ltd. (PFC) 1,737.00p +1.64%
GlaxoSmithKline (GSK) 1,442.00p +1.62%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 345.80p -5.98%
Aggreko (AGK) 1,701.00p -2.63%
BT Group (BT.A) 246.20p -2.34%
Lloyds Banking Group (LLOY) 51.93p -2.28%
Aberdeen Asset Management (ADN) 415.00p -1.66%
Barclays (BARC) 300.90p -1.62%
Kingfisher (KGF) 273.00p -1.41%
Morrison (Wm) Supermarkets (MRW) 254.10p -1.24%
Weir Group (WEIR) 2,012.00p -1.13%
Hargreaves Lansdown (HL.) 693.50p -1.07%
FTSE 250 - Risers
SVG Capital (SVI) 318.80p +3.17%
Investec (INVP) 474.40p +3.11%
3i Group (III) 266.80p +3.05%
Electra Private Equity (ELTA) 2,255.00p +2.78%
Smith (DS) (SMDS) 224.10p +2.52%
Regus (RGU) 118.50p +2.33%
Dairy Crest Group (DCG) 424.50p +2.09%
William Hill (WMH) 374.00p +2.07%
Home Retail Group (HOME) 126.50p +2.02%
Mondi (MNDI) 747.00p +1.91%
FTSE 250 - Fallers
Centamin (DI) (CEY) 52.90p -6.12%
PZ Cussons (PZC) 373.20p -5.38%
Petra Diamonds Ltd.(DI) (PDL) 114.20p -4.83%
New World Resources A Shares (NWR) 294.20p -3.51%
Synergy Health (SYR) 1,080.00p -3.40%
COLT Group SA (COLT) 103.40p -3.09%
Pace (PIC) 217.40p -2.95%
Hunting (HTG) 830.50p -2.92%
Petropavlovsk (POG) 349.50p -2.78%
Barr (A.G.) (BAG) 542.00p -2.69%