The FTSE 100 soared on Thursday after the US Federal Reserve signalled it would cut interest rates significantly in 2024.
London's blue chip index leapt around 2.0% in early trading while the mid-cap FTSE 250 fared even better, up 2.8%.
Gains were broad-based with rate-sensitive stocks such as housebuilders and property firms performing well - Segro and Land Securities jumped more than 5%.
The US central bank left its benchmark interest rate unchanged, as expected, but signalled rate cuts of as much as 75 basis points in the coming year.
The latest quarterly dot plot showed that most officials expect rates to be in the range of 4.4% to 4.9% by the end of 2024 with a small majority of the Federal Open Market Committee (FOMC) anticipating at least three quarter-point cuts from current levels.
Paul Ashworth at Capital Economics thinks the first rate cut will probably come at the March meeting next year.
Jim Reid at Deutsche Bak said: “Yesterday’s FOMC meeting did its best to give investors an early Christmas present, all packaged with a bow and extra special gift wrapping.”
The shift in tone by the US central bank comes ahead of the interest rate decision in the UK later today.
But Kallum Pickering at Berenberg doesn’t expect Bank of England governor Andrew Bailey to follow the Fed’s ‘dovish’ rhetoric.
“After raising the bank rate using open market operations, policymakers are now trying to prevent financial conditions from becoming too easy by influencing market expectations using open mouth operations,” he said.
He expects BoE policymakers “to push back against rising expectations for rate cuts in 2024”.
“If markets listen, it may prompt some temporary market volatility,” he added.