City rebounds sharply on positive sentiment

Another big take-over story, plus Wall Street's highly encouraging performance overnight and again yesterday, helped British stocks rally after the recent five-session setback. Long standing worries that the anniversary of the October crash in 1987 might produce a similar performance this year, because of worries about overvaluation, plus the prospect of rate rises in the US, Britain and the euro zone, faded into the background.

But there was no doubt that the Orange take-over story played a big part in the market's recovery. News that Germany's Mannesman had approached Hutchison Whampoa, Orange's main shareholder with a 44.8 per cent stake in Britain's third biggest cellular phone group, with a view to a take-over, saw Orange shares soar. Other telecoms stocks mirrored the performance of Orange and the Footsie raced higher at the outset.

The FTSE 100 surged to close 124.5 higher at 5,993.7, while the other FTSE indices also rallied, albeit on a more modest scale.

Turnover in equities came out at 1.13 billion shares, but that figure was boosted substantially by a massive 153 million turnover in Vodafone AirTouch.