DISAPPOINTING economic news, a series of profits warnings and the aftermath of the government's veto on generator bids for the regional electricity companies continued to cast a shadow over the London stock market.

A poor start by Wall Street, which opened under renewed downside pressure, after having retreated 35 points overnight, was another factor unsettling British stocks.

But the potential for more takeover bids in the marketplace once again proved a potent lure for the big institutions and speculators. And market sentiment stimulated by the sparkling market debut of Millennium and Copthorne, the hotels group, whose shares ended their market debut at a near-20 per cent premium to the placing price.

At the end of the trading session, the FTSE 100 managed to recoup all and more of its earlier losses and posted a 1.7 gain at 3819.3, ending three consecutive sessions of losses.

The FTSE Mid-250, meanwhile, was always outpacing the 100 index, and eventually settled at a record closing high of 4,553.3, stimulated by keen takeover speculation in the fund management sector, and especially in Perpetual, whose shares shot up almost 6 per cent amid strong rumours that a bid was imminent.

It was the utilities sectors that continued to capture the market's attention, as reports that the government would use its golden share to prevent any takeovers in the generators triggered another big sell-off in National Power and PowerGen. Both stocks were badly hit at the outset, slipping around 3.5 per cent apiece, before stabilising and ending the session well above the day's lows.