Stronger commodity prices, optimism around the next round of US corporate results and talk that FTSE 100 could be embarking on yet another rally, lifted the index through a key level to a fresh one-year high on Monday.
Following a broad-based rally and a buoyant open on Wall Street, the FTSE 100 ended up 48.2 points, or 0.9%, at 5210.2, the highest since late September 2008.
The fact the rally was, for once, not driven by miners and banks alone was coupled with a decisive move through the psychologically important 5200 mark. That sparked speculation over this being the start of the next move higher for shares, after some directionless trading over recent weeks, said David Jones, chief market strategist at IG Index.
"It is only natural after a run like this that we start to wonder how far away a correction is, but for now stock markets are continuing to shrug off any weakness and slides are proving to be short-lived. The next FTSE target traders are eyeing in the short term is the 5350 high hit in September last year - and the way sentiment is going it would not be a surprise to see that hit this week," he added.
Insurer Old Mutual was the top performer of the day, rallying to a 16-month high as investors made the most of a weak run against its peers to buy into the stock. A weaker pound also helped given the proportion on Old Mutual's earnings outside the UK and the shares ended up 4.8p, or 4.6%, at 110.1p. The pound's role in UK stock performance is something Morgan Stanley focusses on today in its note on the UK equities outlook - covered in an earlier Market Forces blog.
AMEC, the consultancy and engineering group, was also among the strongest performers after Collins Stewart made it a "top pick" in the oilfield services sector. Analyst Gordon Gray rates it a "buy" and has a target price of 950p.
"We think AMEC offers one of the best combinations of healthy growth and low risk in the sector, with its exposure to oil sands and nuclear being key long term positives," he said.
Rising metal prices boosted miners, with Vedanta was one of the top risers, up 61p at £22.23. A solid rally for oil prices simlarly helped energy companies and Royal Dutch Shell ended up 28p, or 1.6%, at £17.83 while BP added 9.7p, or 1.8%, to 552.2p.
Among the midcaps, ITV was up 0.95p, or 2.1% at 47.33p despite the latest upset in the broadcaster's quest to fill its leadership vacuum. Goldman Sachs boosted the shares on an otherwise gloomy day for the troubled company, by raising its recommendation on the shares to "buy" from "neutral".
Analysts at the investment bank noted "evidence of modestly stronger-than-expected recovery in third-quarter and fourth-quarter TV ad markets."
They have a 58p price target on ITV, arguing it offers an "attractive valuation case" and that underperformance by the shares provides buying opportunity.
They echoed other analysts' comments on ITV's potential to become an acquisition target again.
"In the medium term we continue to see plausible acquisition interest from RTL/Bertelsmann which previously indicated interest in ITV to replace its Five channel which continues to lose audience share in the UK market," they said.
Ladbrokes was headed the other way, one of the FTSE 250's biggest losers as the fall out from last week's downbeat trading update continues. The shares closed at a eight-month low of 141.1p, a fall of 2.3% from Friday when Britain's biggest bookmaker confirmed a rights issue and conceded too few draws had hurt takings.
Pubs group Punch Taverns was the biggest midcap loser of the day after a downgrade from KBC Peel Hunt to "hold" from "buy" ahead of Wednesday's results. The shares ended down 4.9% at 115.1p in a FTSE 250 up 82.8 points, or 0.9%, at 9460.1.
The British stock index FTSE 100 closed at its highest levels in over a year on Monday, following news of stronger commodity prices.

The share index increased by 48.3 points, or 0.9% to finish the day at a level of 5,210.17, a figure not seen since last September.

The best performer was the Old Mutual insurance company, reaching a sixteen-month high after gaining 4.6%.

Some economic analysts think that the FTSE index could continue to gain for the remainder of the week. David Jones, the chief market strategist at IG Index, said that "the next FTSE target traders are eyeing in the short term is the 5,350 high hit in September last year and the way sentiment is going it would not be a surprise to see that hit this week."

Other European markets also posted gains on Monday. The German DAX index gained 71.35 points to a level of 5,783.23, while the French CAC 40 increased 46.19 points to 3,845.8.