Footsie goes higher in steady trade

London equities remained remarkably cool in the face of a welter of crash and hurricane anniversary stories.

Neither was the market unsettled by worries about the imminent arrival of the new order-driven trading system.

The FTSE 100 index sailed comfortably higher to close up 24.2 at 5,287.9, just below the high of the day. The junior indices followed suit with the FTSE Mid250 index lifting 28.0 to 4,963.8 - a new closing high, and the FTSE SmallCap topping 2,400 for the first time, and closing 11.6 up at a peak 2,405.3.

And while there have been reports of market-makers holding back ahead of Monday's shift to fully automated trading, volume remained respectable at 817.9 million shares by 6 p.m.

The principal motors behind yesterday's rally were both stock-specific and cross-border.

Initially, encouragement sprang from the news that GTE of the US was entering the battle for MCI. BT, which saw its takeover attempt for the US group trumped by WorldCom, has a 20 per cent stake in MCI.

The British telecoms group is seen as likely to benefit whatever happens. Either BT's stake will rise in value or the company will be able to take part in some kind of three-way merger.

However, the BT news was only the most high profile among a clutch of international deals either working their way through the system following the rush of announcements on Monday or suspected to be around the corner.

More details emerged about BAT's insurance merger with Zurich of Switzerland. And this week's announcement of a deal between Reed Elsevier and Wolters Kluwer of the Netherlands continued to drive forward other media companies.

Among financials and insurers, there was speculation about a tie-up between UBS and Dresdner Bank. And the possibility of further activity among French insurers remained in the background.

Strategists said worries that the Labour government would clamp down on domestic mergers were fading as cross-border deals became the buzz phrase.

Mr Robert Buckland, of HSBC James Capel pointed out that the game had changed. "Domestic factors are not dictating domestic markets at the moment," he said. "It is so dangerous to be parochial in markets now."

The inflation data from the US caused only a brief rally on Wall Street. And while gilts were broadly weaker, that reflected the softer tone in mainland Europe rather than the British economy.