By Friday’s close the index had risen 3.8% to 6,121, the first full week of trading representing its best start to a year for over a decade.

The last time London’s blue chip index reached such a high was in May 2008. The FTSE All World index has also rallied, reaching its highest level since May 2011 at 230.67, and the rally has been supported by a return to risk assets.

Last week saw the largest inflows into equity funds in more than five years, according to data from research firm EPFR.

Net flows into equity funds reached $22.2bn (£13.8bn) in the week to January 9, the highest level since September 2007.

Much of the inflows were into emerging market and world equity funds, and equity indices across the world rallied to reflect this surge in optimism, hitting multiyear highs.

The S&P 500, for example, hit a five year high last week, up 3.2% since the start of the year to 1,472.

The figures have fuelled suggestions that 2013 will see a “great rotation” from safer assets such as government bonds into risk assets such as equities.

Investment Management Association statistics released last week revealed net retail sales of equity funds in November reached the highest level since April 2011, while fixed income fund sales dropped to their lowest levels since October 2008.