The British stock market continued its recovery yesterday, with the media and telecom stocks once again leading the way.

The FTSE 100 index, which at Monday's close was down 800 points since the start of the year, started the session as if it was going to enjoy a second successive three-digit gain. At its best level of the day, the blue-chip index was 165 points up at 6,450.9.

But a poor start on Wall Street removed the impetus from the leading stocks, prompting Footsie to end the day just 29.6 ahead at 6,315.4. There were some big individual price movements, with BSkyB becoming the latest stock to benefit from the unveiling of its Internet strategy. While the satellite TV group was up more than 18 per cent, Reuters, which announced its net plans on Tuesday, jumped another 16 per cent. And both rises were surpassed by fellow media group Reed's 20 per cent plus gain.

There was no let-up in investor enthusiasm for hi-tech stocks. CMG, already trading on an historic price-earnings ratio of more than 200, had its second consecutive double-digit gain while Sema also rose more than 10 per cent. The Techmark index rose 272.3, or 5.5 per cent, to 4,971.18.

The small and medium-sized stocks, which did not join in Tuesday's rebound, made up for it yesterday. The FTSE 250 index jumped 88.9 to 6,116.9 while the SmallCap ended 13.4 higher at 3,157.5.

Even after yesterday's rebound, however, the British market remains one of the poorest European performers this year. Morgan Stanley Dean Witter said it had expected a 15-20 per cent correction in British and European stock markets in the first quarter of the year, because of monetary policy tightening.

In Britain, the big sectors such as pharmaceuticals, oils and banks have all sold off, leaving the market to be sustained by telecoms, media and IT stocks. Morgan described a vampire-like phenomenon whereby Internet stocks were sucking the lifeblood out of every other sector.

However it is expected that the British market will rebound in the second half of the year as investors anticipate the peak of the interest rate cycle in the first quarter of 2001.

The Bank of England is expected to increase interest rates by a quarter of a point at noon today.

According to IBES International, the information company, year-on-year earnings growth for companies reporting 1999 figures has so far been 3.6 per cent, higher than analysts' forecasts of 2.6 per cent.

The strongest growth has come in capital goods, finance and technology companies, all of which have managed double-digit growth. The sector that has been hardest hit has been healthcare. Turnover by the 6 p.m. count was 2.8 billion shares.