Britain's FTSE sets fresh record high on first trading day of 2017

Britain's top share index hit a further record high on Tuesday, extending an end-of-year rally into 2017, with financials and commodities-related stocks leading the market upwards.

The FTSE 100 ended 0.5 percent higher at 7,177.89 points as the London Stock Exchange reopened after a long weekend. It set a record high of 7,205.45, rising above the peak reached at the end of 2016 after a 5.3 percent rally in December, its strongest monthly performance since July 2013.

The index ended 14.4 per cent higher in 2016, outperforming major European bourses, as a weakening in sterling after Britain voted to leave the European Union helped support British stocks, especially those with international exposure in dollars.

The start of the year paints a stark contrast to the beginning of 2016, when concerns over Chinese growth roiled equities globally.

"Given a year ago (when) investors came back from the Christmas break to see markets plummet, it is no doubt a big relief that this year has started more positively. The PMI numbers are surprisingly strong," said Adrian Lowcock, investment director at Architas.

Miners, which surged more than 100 per cent in 2016, were up 1.1 per cent, while the oil and gas index gained 1.0 per cent as commodity prices improved.

Other growth-sensitive sectors, such as banks, were also among top gainers, as strong PMI readings in Britain, China and the United States suggested the global economy was in good shape heading into 2017.

UK banks, up 2.2 per cent, were also helped by news saying global banking regulators postponed the approval of long-awaited rules designed to avert a repeat of the financial crisis after failing to agree on the minimum amount of capital banks must hold.

The development meant that the implementation of a tough regulatory environment was pushed back, cheering some investors. Barclays, Lloyds and Standard Chartered were up 2.1 per cent to 3.8 per cent.

InterContinental Hotels rose 1.3 per cent after an upgrade to "overweight" from "equal-weight" from Barclays, lifting the stock to an all-time high.

Top faller was retailer Next, which suffered from a downgrade by Deutsche Bank to "hold" from "buy". It closed 4.3 per cent lower after tumbling by more than 30 per cent in 2016. Deutsche Bank analysts said that even with this slump, the stock did not look especially cheap.

"The sector has already de-rated, mainly on the changed demand and currency outlook due to Brexit, and valuations are typically at historical average levels– cheap but in some cases not cheap enough," they said in a note.