FTSE 100 hits pre-financial crisis levels

The FTSE 100 index reached its highest level since before the 2008 banking crisis on Wednesday, boosted by renewed optimism about the global economy.

After two days of mild declines the January stock market rally resumed with the FTSE 100 rising 45.02 points to 6098.6, having earlier hit a high of 6112. That marked its highest close since 22 May 2008, well before the collapse of Lehman Brothers helped fuel the worldwide financial crisis.

Banks led the way higher, despite executives from UBS telling MPs that the institutions were too arrogant and needed to make sweeping changes in the wake of the Libor-fixing scandal. Ironically, another part of UBS was behind much of the rise in UK banking shares, after its analysts issued a positive note on the sector in the wake of last week's relaxation of capital requirements by the Basel committee, which regulates the global banking industry. Lloyds Banking Group was the leading FTSE 100 riser, up 2.51p to 53.37p as UBS raised its recommendation from neutral to buy, while Barclays was 7.55p better at 294.75p and Royal Bank of Scotland rose 12.9p to 349.9p.

Investors shunned safe sectors and piled into riskier assets such as mining shares, after US aluminium giant Alcoa unveiled better-than-expected fourth quarter revenues and forecast growing demand for commodities in 2013. The positive start to the US reporting season helped give the Dow Jones Industrial Average index a lift in early trading, as did talk that former Citigroup executive Jack Lew was in line to become the new US Treasury secretary. Analysts said this would be received as a very Wall Street-friendly appointment.

Elsewhere UK exporters received a boost as sterling fell to a one month low against the dollar following trade figures which pointed to another poor year.

Angus Campbell, head of market analysis at Capital Spreads, said: "Investors have become increasingly optimistic in 2013 that the global economy is on the mend."

William De Vijlder at BNP-Paribas Investment Partners said: "It has been a good start to 2013 and equity investors have been buying into the idea that we have negotiated the worst case scenario."