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The UK's FTSE 100 flew past the 10,000 points mark for the first time on Friday, riding a wave of upbeat investor sentiment across global markets on the first trading session of 2026.
The blue-chip FTSE 100 (.FTSE) rose 0.5 per cent by 1023 GMT, after marking its strongest yearly performance in 16 years on Wednesday.
"(It) is a powerful signal for UK markets, reflecting ongoing confidence in earnings resilience, attractive valuations and the growing appeal of UK equities to international investors at a time when policy headwinds are beginning to ease," said Axel Rudolph, senior financial analyst at IG.
Benchmark stock indexes in Europe, Taiwan and South Korea, among others, hit record highs on Friday, while US stock index futures advanced, as investor sentiment improved.
On the FTSE 100, the defence and aerospace sector (.FTNMX502010) led gains, rising 2.3 per cent. Rolls-Royce jumped 2.9 per cent, Melrose Industries (MRON.L) advanced 1.9 per cent and BAE Systems (BAES.L) rose 1.4 per cent.
Banks (.FTNMX301010) followed with a 1.3 per cent advance.
The two were among the best-performing sectors in 2025.
The British benchmark gained nearly 22 per cent in 2025, outperforming Europe's STOXX 600 (.STOXX) and the S&P 500 (.SPX). Its gains largely reflect the diversification that the index offers, with little direct exposure to the artificial intelligence sector.
Commodity-linked stocks - oil firms and miners - are heavyweights on the FTSE 100, and have largely benefited from record metal prices and higher oil prices.
Rudolph also pointed out that diversified earnings, strong cash generation and the prospect of a more accommodative Bank of England suggest that the market's outperformance was sustainable even if gains moderate.
London's domestically focussed mid-cap index (.FTMC) was up 0.08 per cent.
Meanwhile, data from mortgage lender Nationwide Building Society showed UK house prices unexpectedly fell 0.4 per cent in December, leaving annual growth at just 0.6 per cent for 2025, the weakest since April 2024.
Construction and materials (.FTNMX501010) and real estate (.FTUB3510) stocks fell 1.3 per cent and 1 per cent, respectively.