Dealers take heart from clutch of positive news

One big bid, an imminent flotation and the prospects of a clutch of low inflation figures inspired a wary London market. The FTSE 100 rose steadily to close more than 1 per cent higher yesterday. Volume may have been low but dealers appeared to be positioning themselves for good times rather than bad.

First came the bid by Schlumberger, the US oil services group, for Sema. A bid had been expected for almost two weeks but confirmation is always a relief. The US group is handing £3.6 billion sterling (€5.63 billion) to investors who should be pumping the cash back into the market. Sema has only just left the Footsie so the impact boosted blue-chip software groups such as Misys and Sage.

Then, there was the flotation of France Telecom's mobile arm. The future may be bright for Orange but there have been worries that it could be black for the rest of the sector. However, at the eleventh hour, the market decided France Telecom might have cut the offer price enough to make it attractive.

If the after-market in the shares takes off, stocks such as Vodafone could recover. Vodafone, which increasingly dominates the UK market, started the week trading close to its 52-week low.

Finally, inflationary signposts pointed down wards. Producer prices data showed factory gate prices were down by 0.4 per cent on the month and retail prices today are expected to confirm that inflation has remained below the government's target for almost two years.

The Bank of England's inflation report tomorrow is likely to confirm the trend. The steady stream of low inflation data is putting pressure on the Monetary Policy Committee to cut harder and faster.

The only shadow, says Mr John Shepperd of Dresdner Kleinwort Wasserstein, is the potential for shocks from the US markets. There will be much nervousness about how Federal Reserve chairman, Mr Alan Greenspan, paints GDP growth and inflation in his testimony to the Senate. As Mr Alan Blinder, the former Fed vice-chairman, put it recently: "Everyone gets hurt when the 800lb gorilla on the economic block slows down."

However, with the Dow Jones Industrial Average up more than 100 before Footsie closed, the UK index was prepared to look on the brighter side. It ended the session 77.1 up at 6,241.4. Volume was 1.7 billion shares.