The stock market was full of Christmas spirit yesterday, extending Tuesday's late burst of strength and looking set to continue its pre-holiday rally.

There were strong gains across most of the market sectors as London signalled its eagerness to follow Wall Street, which rallied strongly overnight. However the US market ran into squalls at the outset of trading in the US yesterday and following a profits warning from 3M.

Wall Street's positive Tuesday showing, which saw the Dow Jones Industrial Average move up 127 points, came in spite of the continuing concerns about the moves to impeach President Clinton and the resumption of threats of air strikes against Iraq.

Dealers said London was being primed ahead of the expiries on Friday morning of the FTSE future and FTSE 100 index options.

There was also another flurry of take-over talk in various sectors and news of more bid action in the chemicals arena, which has seen plenty of take-over activity throughout the year.

Brent International, the small speciality chemicals and inks company, said it has received an approach which could lead to a bid.

Sentiment was lifted by mildly supportive economic news on public finances and unemployment. The Public Sector Net Cash Requirement for November came in at £955 million sterling, compared with a consensus forecast of two billion. UK unemployment was slightly less than consensus estimates but was still up on the month.

As the curtain fell on the trading session, the FTSE 100 was 73.3 higher at 5,630.4, not far short of its best of the day, 5,636.8, reached over lunchtime.

The junior indices fared less well, the FTSE 250 index settling 8.3 ahead at 4,689.6 and the FTSE SmallCap 4.6 up at 2,010.1.