The FTSE 100 has enjoyed its strongest month in more than two years as it started 2025 with a spring in its step. London's blue-chip share index closed 0.3 per cent, or 27 points, higher on the day yesterday at 8674, a peak. It meant that for January as a whole it was up by 6.2 per cent, the best monthly performance since November 2022. And it is better than the 5.7 per cent increase for the FTSE 100 for the whole of 2024.

The rally has prompted hopes that the index will hit the 9,000-mark this year. It is a rare boost for the London market after a period when its bombed-out valuations have seen a number of UK-listed companies fall prey to foreign takeovers and others have been lured to switch to New York. Boost: The FTSE 100 has enjoyed its strongest month in more than two years as it started 2025 with a spring in its step.

Big winners on the FTSE this month include telecoms provider Airtel Africa, up 27 per cent, and wealth manager St James's Place, up 21 per cent. But there have been sharp falls over the course of January for consumer-focused British firms such as Marks & Spencer, down 11 per cent, and EasyJet, off by 9 per cent, amid a darkening economic outlook. Yesterday's milestone comes at the end of a turbulent week when US tech stocks were rattled by the arrival of an artificial intelligence (AI) chatbot created by Chinese firm DeepSeek, developed for a fraction of the sums being spent on research and development in Silicon Valley.

That has left some calling into question the staggering valuations attached to AI-focused companies such as chipmaker Nvidia – and made the more old-fashioned sectors such as banking, mining and oil represented by the London market look more attractive. Richard Hunter, head of markets at broker Interactive Investor, said the UK was now 'being seen as something of a haven destination amid volatility elsewhere'.

In other market moves, gold climbed to a record high of more than $2,800 an ounce yesterday fuelled by a rush to safety amid global uncertainty. Yet at the same time, swingeing tariffs threatened by US President Donald Trump on the campaign trail look like they may not be as bad as feared now he is in the White House. Meanwhile, a steady approach from the US Federal Reserve – which this week paused rate cuts in defiance of Trump's call to go faster – has done nothing to rock the boat.

And in Britain, the Bank of England is expected to cut interest rates next week. Markets are fully pricing in bets that it will be the first of three UK cuts this year. January has been a tough month for the pound, down for the fourth month in a row against the dollar amid growing signs that the economy is stagnating. But that has been a boon to the FTSE, boosting the sterling value of its multinational constituents' overseas earnings.

Susannah Streeter, head of money and markets at broker Hargreaves Lansdown, said: 'The FTSE 100 has set off on another sprint higher as investors see renewed appeal in London stocks. 'Given the volatility this week on Wall Street as investors fret about the trajectory of AI spend, and the impact of Trump's tariff plans, there's been a flight to safer havens, offering more reliable returns, where stocks have been undervalued compared to their US peers.'.