Optimism about economic recovery in the UK and strong expectations of imminent reductions in European interest rates were the catalysts that took the FT-SE 100 index up 26.4 points to 2,969.84 and the FT-SE 250 by 30.5 to 3,392.8.
The FT-SE 100's previous record was established on 8 March, when it soared 35.2 points to 2,957.3. The FT-SE 250, meanwhile, has now hit highs for eight successive days.
The Bank of England took advantage of the market's buoyancy by pitching in with a pounds 1.5bn package of various 'tap' stocks.
Such was the strength of the market that gilt-edged stocks barely strayed from the upward path on the Bank's move and generally held on to early morning gains of three-quarters of a point at the longer end.
Part of yesterday's surge in equities was also attributed to a squeeze caused by institutions proving to be reluctant sellers of stock.
There was nevertheless plenty of activity as the account reached the half-way mark, with overseas investors out in force and snapping up large lines of stock in British companies.
More than 680 million shares were traded, spread across more than 31,000 bargains.
ShareLink, the execution-only broker, said it had done more business in the first week of August than for the whole of the same month last year. The company's shares, floated on the market last week at 250p, advanced by 8p to 296p.
Three out of every four Footsie constituents ended higher, with just seven unchanged and only 17 fallers - most of them down only a couple of pence.
Consumer sectors did better than most, with investors putting faith in the belief that shoppers had at last become reacquainted with the habit of taking more than a handkerchief out of their pockets.
The day did have its casualties, however. Spring Ram opened 13p lower at 60p on yesterday's report in the Independent that a takeover of the kitchens and bathrooms company by Masco of the US had been abandoned. City sources said Masco had been able to place a value of only 45p on Spring Ram shares and was not prepared to stand accused of bottom- fishing by making a bid at that price.
The shares did manage to recover some poise by the time stumps were drawn, and finished with a 4p decline to 69p. Trading was very brisk, with nearly 6 million turned over.
Hickson International also suffered, losing 14p to 194p on news of an explosion at its Ringaskiddy plant in Ireland.
There was also a rumour that Hickson might be preparing the groundwork for a takeover assault on Brent International, which gained 6p to 111p.
Gold remained a disaster area, with the afternoon fix of dollars 379.4 representing a drop of dollars 8.85 from the previous day. The rot continued once New York came on stream, with a further decline to dollars 374.
Lonrho eased 2p to 127p and there was an overwhelming amount of red numbers among shares in the pure gold mines.
Randfontein fell 33p to 542p, Harties plunged 43p to 297p, Driefontein slumped 83p to 716p and Freegold lost 82p to 720p.
Among the biggest Footsie movers was Grand Metropolitan, which gained 9p to 419p on a favourable report in the Wall Street Journal.
The newspaper said several leading US food processors were raising prices because of the effects of flooding in the American Midwest and drought in the South-east.
Among those increasing prices is the Green Giant vegetables company owned by Grand Metropolitan. Green Giant, which saw its profits hit last year by the effects of a bumper harvest, is said to have lifted prices by 9 per cent on bags of frozen peas, corn and beans.
Positive noises from Nomura helped lift Guinness 4p to 470p. Invergordon Distillers gave up 2p to 283p as speculation about a fresh bid from Whyte & Mackay subsided.
Amber Day rose 7p to 71p on the appointment of Peter Carr as chairman and the purchase of a 10 per cent stake by Warburg Pincus.
Banks were subjected to some profit-taking after the recent gains made during the interim reporting season. National Westminster shed 8p to 498p. Standard Chartered, however, climbed 25p to 884p ahead of its results next week.
The FT-SE 100 share index soared by 26.4 points to close at an all-time high of 2,969.8. The FT-SE 250 also hit a high, rising 30.5 to 3,392.8. More than 680 million shares were traded. Long-dated gilts gained pounds 3/4 . The account ends on 13 August and settlement is on 23 August.
Tepnel Diagnostics had a torrid day, losing more than 13 per cent of its market worth as the shares tumbled 27p to 175p. There is speculation that the recent departure of Terence Colley, marketing director, co-founder and 16 per cent shareholder, was far from amicable. Investors are also said to be wearying of the company's slowness to market its DNA and animal testing products.
Shares in United Biscuits missed the merriment, dropping by 8p to 181p following a profits downgrade by Richard Workman, analyst at Hoare Govett. He has lowered his sights for this year from pounds 205m to pounds 198m before tax, and from pounds 230m to pounds 217m for next. Low food price inflation for snacks and biscuits in the UK and flat industry volumes in the US are the two main reasons for the downgrade.