LONDON, Jan 5 ― Britain's FTSE 100 rose yesterday in the first trading session of 2022, after its best annual gain in five years, following signs the Omicron coronavirus variant is less likely to derail the global economic recovery.

The blue-chip FTSE 100 gained 1.6 per cent, closing at its highest since February 2020, while the domestically focussed mid-cap index advanced 1.8 per cent in a catch-up rally after a long holiday weekend.

Financials led gains, with banking and life insurance stocks adding 4.8 per cent and 3.2 per cent respectively.

"A higher rate cycle always calls for a better performance for the banks as it's going to be helpful in their profits, especially their interest rate margins,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

The yield on two-year British government bonds hit its highest since late October after Prime Minister Boris Johnson said new measures were not needed now to fight the Omicron variant.

London-listed airline stocks soared, with Wizz Air, EasyJet and British Airways-owner IAG gaining between 7.5 per cent and 10 per cent, after Hungary-based Wizz Air reported strong load factor data.

Prime Minister Boris Johnson was due to hold a Covid-19 news conference later in the day, amid a surge of the Omicron variant that has led to record high coronavirus cases and hit staffing numbers at hospitals.

The FTSE 100 gained 14.3 per cent in 2021, its best annual performance since 2016, helped by gains in commodity-linked and industrial stocks.

British retailers gained 1.0 per cent, tracking global sentiment, even though footfall in shops in the days after Christmas was 24.5 per cent lower than the same week in 2019, Springboard analysts said.

British manufacturing grew slightly more quickly than originally thought in December and pandemic-related supply chain problems eased a bit, taking some of the heat out of rising input prices, a survey showed yesterday. ― Reuters