Investors drove the FTSE 100 to a new high as hopes rose of interest rate cuts on the back of data showing the economy flatlining.

London’s leading index climbed 113.32 points, or 1.35%, to close at 8505.22, above its previous closing high of 8,445.80 points last May. Over the week it rose 3.1%, bringing its gain since the start of the year to 4.1%.

The increase was partly a consequence of a falling pound which boosted the index’s internationally focused stocks, as well as a rise in oil prices.

It followed two consecutive falls at the start of the week as gilt yields rose amid nervousness over government borrowing.

Odds on a rate cut on 6 February shortened after a fall in inflation and weaker-than-expected UK retail sales in December which unexpectedly declined by 0.3%, defying expectations of an improvement. That was followed by a miserly 0.1% rise in GDP.

There is now market talk of four interest rate cuts this year, though some are cautioning until the impact April’s tax rises come into effect which may force inflation up in the second half of the year.

BP and Shell rose 1.3% and 1.2%, respectively, on the back of the rising oil price, with investors also supporting BP’s cost-cutting plans. Mining giants Rio Tinto and Glencore experienced share price increases of 2.16% and 3.38%, respectively, amid reports of early-stage merger discussions.

Housebuilders were also higher on hopes that mortgage rates might soon fall. Persimmon rose by 124p, or 11.5%, to 1201p over the week and Barratt Redrow was up by 28p, or 7%, to 426¾p.

Mining technology company Weir Group was up 36p, or 1.58%, at 2314p after announced a joint venture to supply mining equipment in Saudi Arabia.

The Scottish firm is partnering with Olayan Saudi Holding Company to serve the growing minerals sector in the Middle East state.

Jon Stanton, Weir’s chief executive, said mining is a “core economic pillar” in Saudi Arabia’s 2030 programme to diversify its economy.

“Combining Weir’s technical expertise with Olayan’s local insights will allow us to better serve our customers and drive growth in the region,” he said.

China’s economy outperformed expectations in the final quarter of 2024, expanding by 5.4% as government stimulus measures took effect. That brought annual GDP growth to 5%, matching Beijing’s target but slowing from a revised 7.4% in 2023.

In currency markets, sterling was down 0.51% on the dollar to trade at $1.2177, as it slipped 0.32% against the euro, changing hands at €1.1842.