Further reassurance from the Asian markets, plus a confidence-boosting leap by Wall Street, injected renewed enthusiasm into London's equity market.
The FTSE 100 index made rapid progress for the third straight session, hurdling the 5,200 level and eventually settling a net 81.6 ahead at 5,203.4. The Dow Jones Industrial Average also accelerated back past the 8,000 mark.
Footsie has rallied 167.8, or 3.3 per cent, since Thursday night as the market has recovered from last week's bout of Asian-induced weakness, when the South Korean currency was devaluing by a daily 10 per cent. Once again it was the banks, specifically Abbey National and Alliance & Leicester, that featured prominently.
The index is now only around 164 points away from its all-time intra-day high, reached on October 2nd. Some optimists still maintain that the index may yet take a dart at the record before the year is out. The first expiry of the Footsie future under the new trading system, scheduled for Friday, may well play a big part in whether the index approaches its previous peak.
Second liners were also being chased higher, but at nothing like the pace of the leaders. The FTSE 250 made good early progress, before being dragged lower after a profits warning issued by Danka, the office equipment supplier, whose shares plunged by more than a half. The 250 index finished 6.0 down at 4,757.0. The SmallCap eased 1.1 to 2,298.8. As well as the international factors lifting sentiment there was more positive news on the domestic takeover front, albeit in the smaller stocks.
Capping a session of widespread gains was news that Bass, the big brewing and leisure group is returning £850 million sterling to its shareholders.
"The market loves the sound of cash being returned to shareholders, because it gets pumped straight back into the market," said the head of trading at one big European securities house.
There was only limited help to the big exporters yesterday from the currency markets, where sterling nudged higher against the deutschmark, with the Bank of England trade-weighted index finishing at 103.0, up 0.6.
Sterling fell sharply on Monday when the currency reacted to an OECD report suggesting a UK economic slowdown in 1998.
Wall Street's gain on Monday, where the Dow Jones Industrial Average rose by around 1 per cent, was complemented by fairly solid displays in most Asian markets. London was accordingly strong from the outset, despite a rather soggy performance from gilts.
London got a further boost in the afternoon, as the US market came in on a firm note, in the wake of the weaker-than-expected inflation data for last month.
