The FTSE 100 plunged 14pc in 2020 but is now closing in on its best year in more than a decade after rebounding 15pc in 2021. The index is on track for its strongest performance since 2009 when shares bounced back from the financial crisis.

“For now, markets are overwhelmingly pricing in the latest variant as a milder incarnation, despite its easier contractibility,” said Jeffrey Halley, market analyst at Oanda. He said investors are expecting the “global recovery hitting a minor bump, and not a pothole”.

Joshua Mahony, market analyst at IG, said the UK index is being lifted by the “recent festive push” on global markets amid “tentative optimism” on omicron. He added: “While heightening the chance of short-term restrictions, the rapid spread, mild outcomes, and apparent ability to replace the deadlier delta variant means omicron could in fact bring a swifter return to normality.”

Shares in Royal Mail, B&Q owner Kingfisher and Spirax-Sarco Engineering led the FTSE higher. Despite wider market optimism over omicron this week, travel stocks, such as British Airways owner IAG, were among the biggest laggards on London’s leaderboard.

The domestic-focused FTSE 250 rose 1.1pc to hit a six-week high as stocks in the US and eurozone took a breather after already making strong gains this week.

After hitting a record high on Wall Street’s return to trading on Monday, the S&P 500 inched up 0.1pc in early trade on Wednesday. The benchmark US stock index is still on track to gain more than 27pc in 2021.

Analysts at Saxo Bank said global shares have enjoyed a “blistering rally” as the omicron “continues to rage and fails to register on this market”.

Jussi Hiljanen, analyst at SEB, said markets this week have been “supported by investors’ optimism that the economy can cope with Omicron-related risks and tighter central bank policies”.

However, he cautioned that markets will be volatile “for some time to come”. While an improving outlook on the virus is helping to lift stock prices, investors will still have to navigate the threat of rising interest rates in 2022 as central banks seek to stamp out inflation. 

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