The FTSE 100 ended up 21.33 points, or 0.3 per cent, at 6,873.08 points.
Forex.com technical analyst Fawad Razaqzada reckoned there was scope for the index to hit 6,950, the record peak set 14-and-a-half years ago, and then the 7,000 level. “But we could go far beyond those levels over the medium term,” he said.
Housebuilding shares, which have surged over the last year on the back of a booming UK property market, outperformed.
Persimmon and Barratt Developments both rose 3.2 per cent, the top FTSE 100 risers, after smaller rival Taylor Wimpey said sales rates were at the upper end of its expectations, sending its shares up 7.6 per cent.
Some analysts said the sector’s gains, which have seen the Thomson Reuters UK home-building index rise almost 70 per cent since the start of 2013, might fade on prospects of an interest rate rise in Britain next year.
“I’d be tempted to sell into any rallies on the housebuilder shares,” said Beaufort Securities’ Basil Petrides.
The FTSE 100 reached 6,877.39 points yesterday morning, taking it past last year’s peak of 6,875.62 points, which was its highest level since early 2000.
EasyJet limited the index’s gains as investors took profits on the low-cost airline after a powerful rally.
EasyJet has jumped around 50 per cent over the last 12 months, but it fell 4.2 per cent after posting a first-half loss that beat forecasts. Its drop made one of the biggest dents on the UK benchmark in terms of points.
“EasyJet’s one of my favourite stocks, but they’ve had a fantastic run,” said Joe Rundle, head of trading at ETX Capital. “Just a bit of profit-taking; looks like it should bounce around £16.” The shares are trading at 1,658p.
Strength in AstraZeneca helped to steady the index. US rival Pfizer suggested it could increase its offer of £50 a share for the British drugmaker if AstraZeneca engaged in talks.
AstraZeneca, which has surged more than 20 per cent since Pfizer indicated in April it wanted to buy the firm, rose 0.7 per cent to 4,642p.
Meanwhile, The FTSEurofirst 300 index of top European shares ended 0.3 per cent higher at 1,368.75 points after hitting an intra-day peak of 1,369.04, a level not seen since 2008.