A merger-inspired surge on Wall Street, where the Dow Jones Industrial Average jumped more than 100 points in the first few minutes of trading, allowed the FTSE 100 index to regain the 6,000 level yesterday.

The London market had its own modest bout of takeover speculation, although talk of an Asda-Safeway deal was dismissed by both parties. And shares in EMI were the sharpest Footsie fallers, after Friday's announcements that talks with a suitor had been abandoned.

The market traded rather listlessly at the start of the day, with Footsie reaching a low of 5,957.4, down 12.4, after the first hour of trading. But news of the US mergers, and the reaction on Wall Street, allowed shares to rocket ahead in the afternoon, carrying the leading index to close 58.5 higher at 6,028.3.

The junior indices, which have been lifted recently by the decline in sterling, chalked up another set of closing records - the FTSE 250 gained 31.3 to 5,772.4 and the SmallCap rose 24.3 to 2,728.9. The British pound slipped slightly once more yesterday.

Meanwhile, the FTSE All-Share index, in which Footsie has a heavy weighting, gained 25.2 to 2,844.4, within three points of its all-time closing high, set on April 6th.

Mr Robert Buckland, UK strategist at HSBC Securities, said the market was well supported by liquidity and by the fall in bond yields over the past 18 months. "But the bond markets are starting to run out of steam. The next 1,000 points are going to be harder work than the last 1,000."

The latest Merrill Lynch/ Gallup survey of UK fund managers found bulls and bears of UK equities exactly balanced, after bears had predominated in April. The managers continue to be positive on Europe and on UK and international bonds - they are sharply negative on Japan and the Pacific basin.

The day's economic news was broadly in line with expectations, leaving the 10-year gilt virtually unchanged on the day. There was little sign of inflation at the producer level, with April's input (raw material) prices down 0.9 per cent on the month and 9 per cent on the year, while output (factory gate) prices showed only a 1 per cent annual rise.

Industrial production jumped 0.7 per cent on the month (thanks to a weather-related rise in energy use) but manufacturing output was flat. All told, manufacturing activity fell slightly in the quarter, the second drop in succession, putting the sector technically in recession.