Retailers were among the best performers in London, boosted by Monday's upbeat report on sales last month from the British Retail Consortium and good results from the supermarket chain Tesco.
Property shares benefited from brighter news from estate agents, who said March saw the strongest housing market activity for two years.
Many analysts who had not expected the FT-SE 100 to pass the 3,800 mark before mid-year have begun to set their sights on the target of 4,000. Economists expect most of the figures due this week, including unemployment, earnings and retail prices, to be helpful. However, the full-year figures for government borrowing could be disappointing for the gilts market. It will also scrutinise the minutes released today of the meeting on 7 March between Kenneth Clarke and Eddie George for hints about the Bank of England's attitude to further reductions in the cost of borrowing.
Investors are reacting to hopes that the economy is improving enough to help the Conservatives start climbing out of the electoral doldrums. "There is a feeling that the market was discounting political risks. The FT-SE 100 bears the brunt of the changes in political sentiment," Philip Isherwood, equity strategist at Kleinwort Benson, said.
Robert Barrie at BZW said it was increasingly clear there was a pick- up in the economy that would help corporate profits. "The pause in growth has been rough for some firms, so there could be quite a bounce back in corporate earnings."
There were fresh signs yesterday of buoyancy in the economy. Optimism among small businesses leapt in the three months to February, according to a quarterly survey of 1,700 small businesses by the office supplier Office World.
The survey's poll of the voting intentions of the small business owners also signalled the first increase in the Conservatives' share since November 1994. It climbed 4 points to 31.7 per cent, with Labour's standing unchanged at 26.5 per cent.
Separately, new construction orders jumped 9 per cent in the three months to February compared with the previous three, according to the Department of the Environment. They were 11 per cent higher than the same period a year earlier despite falling in January and February.
Wall Street's strength underpinned the rise in London share prices. The Dow Jones index was more than 14 points higher at 5,607.37 by mid-morning, helped by some strong first-quarter corporate results.
They included the car giant Chrysler, which reported first-quarter earnings of $1.01bn and record revenues of $15bn, well above analysts' expectations. Other contributors to the Dow's advance were rises in Eastman Kodak and IBM.
There was additional evidence that the US economy was steadily recovering from its earlier slowdown. A 0.5 per cent drop in industrial output in March resulted from the strike at General Motors. Adjusting for the strike, output grew 0.3 per cent.Reuse content