The re-emergence of some old bid stories plus a resurgence of confidence across global stock markets provided the impetus for the London market's record oneday points gain yesterday.

But that record-breaking performance took place against a gloomy background in many of the City's trading rooms as dealers, salesmen and analysts braced themselves for what is expected to be one of the bloodiest days for market personnel for some years.

There were widespread expectations that substantial job losses would be revealed today by Merrill Lynch.

Furthermore, rumours were rife around the market that other broking houses could take advantage of the expected move by the US broker and unveil their own job cuts.

Marketmakers were taken aback by the power and pace of the market's continued rally, which began last Friday and gathered momentum yesterday, driving the FTSE 100 back through the psychologically important 5,000 mark.

At the finish of the session, the FTSE 100 had posted a 214.2 or 4.4 per cent gain at 5,037.6, a two-session rise of 338.7 or 7.2 per cent. That advance by the FTSE 100 was its 12th biggest in percentage terms.

The market's second-liners and the small-caps also drew strength from the overall recovery of confidence.

The FTSE 250 moved up 79.7 to 4,368.7 and the recently battered FTSE SmallCap index managed a 9.8 gain at 1,844.3.

The takeover/merger talk provided much of the initial upside for the market with a report that British Aerospace and DaimlerBenz Aerospace are forging an alliance.

Turnover in equities reached 904.3 million shares.