London's stock market rallied yesterdayto a new two-month peak, supercharged by a Brexit-hit pound and energy giant BP's surging annual profits, dealers said.

Other European indices rose also by well over one per cent as Wall Street built on the previous day's gains in early New York business, ahead of US President Donald Trump's State of the Union address.

Sterling sank on news that activity in Britain's dominant service sector almost ground to a halt in January, as companies fretted over the nation's looming departure from the European Union next month.

The weak pound boosted London's FTSE 100 because the benchmark index features large multinationals earning in dollars and euros.

Equities around the world remain in robust mood.

The IHS Markit/CIPS UK services purchasing managers' index fell to 50.1 down from 51.2 a month earlier. A reading above 50 indicates growth.

Tuesday's services data followed disappointing manufacturing and construction numbers, with analysts declaring that warning lights are flashing. 

"The pound has fallen to its lowest level of the day in recent trade after a third consecutive data point from the UK in as many business days has flashed a further warning sign for the economy," said XTB analyst David Cheetham.

In company news, British energy giant BP topped the FTSE leaderboard after revealing that annual net profit almost trebled to €8.2 billion last year as oil prices soared.

Profit after tax rocketed from $3.4 billion in 2017, "primarily affected by higher oil prices and favourable foreign exchange" rates, BP said in a statement.

The news sent BP's share price roaring 4.4 per cent by the mid-afternoon, and helped other petroleum majors, too.