The FTSE 100 will open at a near record high this morning after investor optimism that the UK economy may not be as weak as feared propelled share prices.
Shares in London posted strong gains on Friday after figures from the Office for National Statistics showed that the economy enjoyed modest growth of 0.1% in November.
Economists had expected a 0.2% decline in output but the surprise rise fuelled hopes that the UK may have avoided sliding into a recession towards the end of last year.
Investors responded by pushing the FTSE 100 up by another 50.03 points, or 0.64%, to 7,844.07.
Analysis by The Times suggests the blue-chip index has risen in all but one session this year and is within striking distance of its record closing high of 7,877.45, which it reached in May 2018.
The mid-cap FTSE 250, which has a greater focus on the domestic economy than the FTSE 100, rose by 111.71 points, or 0.56 %, to 19,952.84 yesterday. The index is back to where it was last August, having climbed by 5.8% since the start of the year.
Treasury windfall
And it looks like the good news will result in an unexpected windfall for the Treasury.
Ruth Gregory at Capital Economics, who is a former analyst at the Office for Budget Responsibility (OBR), the Government's tax and spending watchdog, told The Telegraph the outturn would also boost the public finances through higher tax revenues.
She said the stronger outlook was likely to reduce borrowing by around £7billion alone in the coming financial year.
A sustained fall in wholesale energy costs will also reduce borrowing by around £9.6bn, according to Capital Economics.
Taking into account the extension of the £5.5bn business energy price support in 2023-24, Ms Gregory said this suggested the Treasury had "about £11bn to play with".
FTSE 100
The UK's top share index, the FTSE 100, was up 11 points at 7,855 shortly after opening this morning, following Friday's 50-point gain.
Brent crude futures were down 1.17% at $84.28 a barrel.
Companies reporting today
- Ashmore Group - Q2 Assets Under Management
- Bankers Investment Trust - Full year Results
- Rio Tinto - Q4 Operating Review