The first traders returning to their desks from the Christmas break saw the blue-chip index up 2.6% in early trading to highs not seen early since March, as it surfed a wave of relief that a deal has been struck.
At 9.30am, the FTSE 100 stood at 6,669.21, up almost 170 points on an opening price of 6502.11, set when the exchange shut down on Christmas Eve.
Meanwhile, the domestically focused FTSE250 climbed 1.99%, or 410p, to hit 20,957.18 its highest level since February. Sterling held firm against the dollar, trading at its highest level all year at around $1.35, but remains down against the euro at €1.10.
Johnson’s Brexit deal, announced several hours after the Christmas close, was expected to be given provisional approval in Brussels today before being rushed through the UK’s houses of parliament in a day-long video session tomorrow.
The global mood was lifted after US President Donald Trump yesterday signed a $2.3trillion Covid relief and spending package, averting a partial government shutdown. He had previously criticised the bill for being “wasteful spending”.
Gains were broad-based, with British Airways parent IAG the top performer on the FTSE 100, up 4.1% to 170.05p while engine maker Rolls-Royce and InterContinental Hotels also gained.
AstraZeneca rose sharply after saying that it and Merck’s Lynparza treatment had been approved in Japan for the treatment of advanced ovarian, prostate and pancreatic cancers.
Insurer Admiral also lifted after agreeing to sell confused.com to RVU – the comparison division of Zoopla’s ZPG – in a deal valued at £508m.
Concerns over the absence of detail in the UK’s free-trade accord with the EU took the shine off some banking stocks, with Barclays down 1.1% and Natwest off by 0.2%.
Russ Mould, investment director at AJ Bell, said: “The FTSE 100 and FTSE 250 are both up nicely in the early exchanges and sterling is holding on to the $1.35 and €1.10 marks, so markets seem to be welcoming the Brexit deal that was announced on Christmas Eve.”
But he cautioned: “Nerves remain over what deal will be struck in 2021 when it comes to financial services and indeed services overall, which provides a far greater percentage of UK GDP than fishing or manufacturing.
“A double-dip recession, thanks to new viral strains and perhaps more stringent lockdowns, could put equity investors on the back foot – even if the FTSE 100 is down by a sixth from its August 2018 and January 2020 highs, the index is up by 30% from its March 2020 nadir of 4,994, so some degree of recovery is already expected.”
George Godber, of Polar Capital, told the BBC: “We should see some relief coming through as a result of the [Brexit] announcement. Whatever people think of the deal its infinitely better than no deal.”
“With many people not in the office the majority of the move is likely to take place in early January but I’d expect a healthy move up in domestic shares in the 250 this morning maybe as much as 1 or 2%.”
Edward Moya, market analyst at Oanda, said: “UK stocks will rise sharply as chaotic business disruptions have been avoided. Securing a Brexit trade deal gives many investors the greenlight to bet on the UK economy over the long term.”