A WORRYING slide in gilts and bunds took some of the gloss off an otherwise comforting performance by British equities.

The retreat in gilts was attributed by dealers to a similar move by German bunds in the wake of a disappointing bund auction and ahead of expected German January M3 money supply numbers.

Gilts aside, it was a highly respectable showing by London, with the FTSE 100 index shrugging off small bouts of selling in mid-morning and gradually building on Wednesday's good rally to end the session 14.4 higher at 3740.0, for a two-day gain of 25.4.

Second-line stocks were also well-supported, with some excellent performances by a handful of housebuilders, insurances and a number of individual stocks, driving the FTSE Mid-250 up 15.7 to 4197.7. That left the index within 2.2 of its all-time high and some traders said it was set to race through the 4200 level.

Once again, it was the US that provided the main driving force behind the London market. The Dow Jones Industrial Average jumped 57 points overnight while bonds also gained ground, and gave a solid foundation to all European markets.

Wall Street's good showing came as that market reassessed the comments made by Mr Alan Greenspan in his congressional testimony.

The Footsie began the session on a quietly firm note, up around six points, but quickly ran into pockets of selling pressure. This was said to have reflected at least two trading programmes, thought to have been weighted on the sell side and which saw the Footsie dip into negative territory in mid-morning.

Once the programmes were absorbed, however, the market began to gather momentum, with the pace accelerating when US markets opened.