The FTSE 100 came within a whisker of closing above 5,900 points for the first time since the summer of 2001 yesterday. As on Friday, it was the telecoms sector that spearheaded the advance.
Vodafone and BT Group led the way, advancing 11.25p to 231.75p and 3.5p to 125p respectively, with investors excited by further consolidation, this time in the United States, where AT&T moved to acquire BellSouth for $67bn (£38bn).
News of the deal saw Verizon Communications, America's second-biggest telecoms company, announce that buying Vodafone's 45% stake in their fast-growing mobile phone joint venture, Verizon Wireless, was a priority.
Analysts reckoned the BellSouth bid might also spur other telecoms firms in the US and Europe to consider deals in an effort to bulk up. In that vein, BT, which has been the subject of private equity bid speculation in recent days, could be an attractive target.
Those gains, combined with strength in HSBC, up 14.5p to 989.5p after results impressed, helped the FTSE 100 to end 39.1 points higher at 5,897.8, having earlier touched 5,924.5. Elsewhere, the FTSE 250 rose 73.7 points to 9,546 - a record high - while the FTSE Small Cap index climbed 19.1 points to 3,609.9.
Market turnover was good, swollen by heavy trading in Vodafone (1.25bn shares) and a big dividend-related trade of 50m shares in Lloyds TSB, up 1.25p to 547p. Lloyds shares will be trading without entitlement to a final dividend of 23.5p tomorrow.
There was also brisk business in Standard Chartered, the emerging markets bank, after Morgan Stanley placed 7.7m shares at £15.00 for a client. Standard shares gained 25p to £15.12.
Standout features were few and far between yesterday. The FTSE 250 insurance broker Jardine Lloyd Thomson fell 31.5p to 445p on jitters ahead of today's results, while Cairn Energy slipped 35p to £19.62, as investors banked profits made during the stock's recent run-up from £17.50.
The retail sector provided the few stories that were doing the rounds. Matalan gained 7.25p to 198p on further management buyout rumours. The Dutch broker ABN Amro said reports that John Hargreaves, founder and 50% shareholder, would look to take the company private at 220p a share but retain a large equity stake were plausible.
Elsewhere in the sector, JJB Sports gained 6.25p to 181p as Friday's rumours of predatory interest from the serial dealmaker John Lovering refused to die down. WH Smith gained 3p to 406.75p amid continued talk that Kate Swann, chief executive, has put the company's news distribution business up for sale.
CSR, the wireless chip designer that rose 6% last week, eased 17p to £10.95 on profit-taking. But industry watchers believe a CSR design has been incorporated into Nokia's new 6125 phone.
At the lower end of the market, Ocean Power Technologies closed above 100p for the first time since October. OPT makes wave-powered generators and was recently selected by the South West of England Regional Development Agency to help develop the world's first wave energy farm. Traders reckon OPT has been overlooked by investors who are increasingly keen on alternative energy plays. Moreover, with a cash balance of £25m, against a market capitalisation of £46m, they would not be surprised if the company had received a takeover approach. The shares rose 4p to 103p.
Bid rumours also swirled around Instore, owner of the Poundstretcher retail chain. Last week, the company's South African part-owner, Tradegro, ousted its chief executive, Angus Monro. Traders believe that Tradegro has appointed Numis Securities to work on an offer for the 45% of the company it does not own. A bid of about 55p a share is rumoured to be in the offing. Instore shares eased 0.25p to 43p.
Elsewhere, there were further gains for Absolute Capital Management, the hedge fund manager which floated on Friday at 141p. The shares leapt a further 70p to 280p, a move traders attributed to the company's tiny free float.
Raymarine, the marine electronics group, was among the most heavily traded small-cap issues after HG Capital, a pre-flotation backer, took advantage of recent share price strength to sell 7.25m shares at 300p through broker Collins Stewart. Raymarine shares, issued at 152p on flotation, eased 0.75p to 312.5p.
There was also heavy trading in Wyevale Garden Centres, up 6.5p to 550p, after West Coast Capital, the investment vehicle of Sir Tom Hunter, increased its stake to 25% with the purchase of 5.6m shares at 555p.
Rensburg Sheppards, the private client fund manager and stockbroker, was marked 18p higher at 832p amid talk that the South African bank Investec may sell its 48% stake to HSBC.
The cash shell Ragusa rose 2.5p to 27.5p on rumours that it is discussing two potential deals: one involving a firm in the gaming industry and the other an oil exploration project in Nigeria.
Finally, Crosby Capital, the niche investment bank run by the former Nomura trader Simon Fry, eased 2.25p to 98.5p on news that trading in the shares of TechPacific Capital, its biggest shareholder, had been suspended pending details of a convertible bond issue.
Spinning the wheel
London Clubs International was back in focus yesterday. Last month the company sold its Mayfair casino Les Ambassadeurs for £115m, a deal which led the City to conclude that a merger with rival Stanley Leisure could not be far away.
While that deal still may happen, City traders believe there is another party interested in acquiring the casino operator. The name in the frame is Ladbrokes. The betting group is on the lookout for acquisitions after the sale of its hotel business. The talk in the Square Mile yesterday was that Ladbrokes had approached LCI's biggest shareholder, the Malaysian gaming group Genting, to see what price they would want for their 29.8% stake. LCI shares, which have risen 30% over the past year, rose 1p to 147.25p.