The FTSE 100 hit highs not seen since January today but fell back slightly to rise 2.21 per cent to 4,336.94.

A buoyant US market and hopes the economy has turned a corner kept the UK’s leading index rising.

British Airways led the rise, bouncing back after concerns last week that profits would take a hit from swine flu fears, and finished the day up by 12.09 per cent.

“With more than a few people expressing this is the start of the next bull market, momentum has been positive over recent days, with investors piling in, worried about missing out on further recovery,” said Tim Hughes, head of sales trading at IG Index.

However, Mr Hughes warned that there are two events this week in the US that could disrupt the bull market.

On Thursday, the US government is expected to release the results of the ‘stress tests’ on banks that will reveal which ones will need additional funding, while on Friday unemployment figures for April are out.

“Normally the market would be cautious around these, but for today at least, traders seem happy to keep on ignoring any potential for bad news, continuing to hope that both markets and the wider economies have turned the corner,” Mr Hughes said.

Mining and banking firms were heading higher on the FTSE, with Vedanta Resources up 11.5 per cent and Lloyds Banking Group up 10.49 per cent.

Defensive stocks were less popular with investors as optimism returned to the market, and Morrison supermarkets fell 3.42 per cent, while Scottish and Southern Energy was down by 2.26 per cent.