The FTSE 100 Index has got 2011 off to a positive start by climbing back above the 6000 barrier, buoyed by bullish performances from markets across the globe.
In its first trading day of the new year, the FTSE continued the strong December run which helped it rise 9% in 2010.
The index soared 100 points or 1.7%, reversing the losses it made on New Year's Eve when it fell 71 points.
A number of major markets across the world also started the new year with a flourish following some strong economic data.
In the US, the Dow Jones in America was up 0.8% after the Institute of Supply Management's index of manufacturing activity rose in December for the 17th straight month. Asian markets were also encouraged by the news, with the Hang Seng in Hong Kong and Japan's Nikkei up 1% and 1.7% respectively.
Higher oil prices also fuelled the markets, after the cost of orders for February rose to 91.6 US dollars. Markit added to the rally when it reported that its purchasing managers index for eurozone manufacturers hit an eight-month high.
Ben Potter, a market strategist at IG Markets, said: "There's definitely an air of optimism about the global economic outlook now."
Investors also shrugged off fears that today's VAT rise from 17.5% to 20% will curb consumer spending and push the UK back into a double-dip recession.
David Buik, an analyst at BGC Partners, reflected the optimism of many in the City: "As for VAT, I am not sure it will have as devastating an effect on life as many would have us believe.
"Yes, maybe retail sales will fall by as much as £2.2 billion in the first quarter, but if the economy gets a little momentum behind it, perhaps the damage it may cause will be minimal."
