By Shashwat Chauhan and Johann M Cherian
(Reuters) -Britain's exporter-heavy FTSE 100 jumped more than 1% in its first day of trading in 2023, as energy, banking and healthcare stocks supported the index.
The blue chip FTSE 100 ended up 1.4%, touching a near seven-month high during the session, while the more domestically-focussed FTSE 250 midcap index closed 1.5% higher at a more than three week peak.
"I could see it carrying on for today," said Giles Coghlan, chief market analyst at HYCM, but warned the stock rally was not likely to last longer term because a majority of fund managers were "really concerned about stagflation".
Banks and pharmaceutical firms gained between 2% and 2.9%, while energy heavyweights Shell and BP rose 1.7% each.
Still, the International Monetary Fund warned that 2023 would be a tough year for major economies including the United States, Europe and China.
Data showed China's factory activity shrank at a sharper pace in December, while in Britain, manufacturers reported one of their sharpest falls in activity since the 2008-09 recession.
The resources heavy FTSE 100 outperformed major foreign bourses last year and now investors will be focused on the Bank of England's monetary policy path and the impact it has had on company earnings thus far.
"The first half of this year will be tricky because of the Bank of England where they tend to use strong words in their language to describe situations, and then we will also get some pretty poor numbers from some of the UK listed companies," said Adrian Gosden, investment director at GAM Investments.
Cineworld climbed 0.8% after the British cinema operator said it would not sell any of its assets individually, and that it had not held discussions with AMC Entertainment about the sale of any of its theatres.
Rolls-Royce soared 6.1% after Jefferies raised the airplane engine maker to "buy" from "hold".
(Reporting by Shashwat Chauhan and Johann M Cherian in Bengaluru; Editing by Nivedita Bhattacharjee and Mark Potter)