The UK’s blue chip FTSE 100 closed at its highest level since May 2018, as investors showed their relief over surprisingly good economic figures for November.
AstraZeneca was among the top gainers, as the FTSE 100 closed 0.6 per cent higher at 7,840.55, recording its second straight week of gains.
European indices also mostly rose, helped by new data showing Germany had a better-than-expected 1.9 per cent growth last year.
“The FTSE 100 is closing in on record highs as the UK's unexpected GDP [gross domestic product] growth caused a welcome swell for the market,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“Investors are also eyeing the fact that US inflation has continued to weaken, which has added to hopes that the Federal Reserve could be convinced to maintain, if not downgrade, the current interest rate hiking cycle, which has sent positive ripples across the wider eurozone.”
In November, the UK economy unexpectedly eked out a modest growth, lifted higher by World Cup spending and video game sales.
“It is too soon to conclude the economy will be able to get through this period of high interest rates and high inflation largely unscathed and we still think a recession is on its way,” warned Ruth Gregory, senior UK economist at Capital Economics.
Among stocks, AstraZeneca advanced 1.8 per cent after it signed a co-operation deal with China's Genertec Meheco for Covid antibody drug Evusheld.
Banks enjoyed the biggest boost on the benchmark index, with HSBC and Lloyds gaining 1.7 per cent and 2.8 per cent, respectively.
The mid-cap FTSE 250 also notched its second straight week of gains. Sectors such as retailers and cars and parts — among the laggards in 2022 — added between 4.5 per cent and 7.5 per cent, respectively.
“We had some encouraging trading statements from the retail sector, suggesting the Christmas holidays shopping season wasn't as bad as expected and banks have performed well because there is a sense now that economic conditions in the first half of the year are going to be less adverse than people thought [before],” said Andrew Bell, chief executive of Witan Investment Trust.
The more domestically focused FTSE 250 mid-cap stocks ended 0.6 per cent up.