The FTSE 100 was pushed higher by a revival in supermarket stocks and official figures showing inflation at a 14-year low.
The CPI measure of inflation fell to 0.5 per cent, equalling a record low in May 2000, and further fuelling forecasts of interest rates staying lower for longer - bolstered by remarks from Bank of England governor Mark Carney.
David Madden, market analyst at IG, said: “Equity dealers are delighted as the bank is now even further away from a rate hike.”
The Footsie added 40.78 points to 6,542.2. Morrisons was among the leading climbers after the chain ousted Dalton Philips as chief executive and posted Christmas sales figures that were slightly ahead of City hopes. With wider industry data showing sales growth of 0.6 per cent in the past 12 weeks, Morrisons advanced by 4 per cent or 7.9p to 184.8p, while rival Sainsbury’s, which reclaimed its position as Britain’s second largest grocer over the Christmas period, rose 8.7p to 249p. Tesco was 7.4p higher at 212p.
Meanwhile, Debenhams slumped 7 per cent in the FTSE 250 Index after it said margins were at the lower end of expectations. Shares fell 5p to 70p.
Online retailer Asos had a better day, as it stuck to forecasts and delivered pleasing Christmas numbers days after rival BooHoo had spooked the market with talk of fierce competition. The shares were up more than 8.5 per cent on the Alternative Investment Market, adding 208p to 2,635p.
Investors in Game Digital had no time to react as the retailer put out a profits warning after the market closed last night. Its shares had added 4p at 348p, but it said that “due to the lower than expected margin rates being achieved on hardware” it was trimming its profit guidance for the current year.