Comments by Mr Alan Greenspan, chairman of the US Federal Reserve, and a man who has frequently proved able to move markets, helped engineer a powerful global rally yesterday.

London was in the forefront of the recovery, with stock prices racing ahead across the board, driven not only by the better outlook for interest rates but also by another burst of takeover news.

The bid stories included an approach for Manchester United, one of the world's most famous football clubs, merger activity in the food retailing arena and hints of a merger involving Vodafone, the biggest of the UK cellular phone companies.

Such was the momentum behind the equity market that the FTSE 100 posted its second biggest ever points gain in a single session, finishing 180.0 higher at 5,347.0.

The share price gains were widespread, with the FTSE 250 index posting an 83.8 advance at 4,747.1, up 1.8 per cent, with the help of the Manchester United news. The FTSE SmallCap, meanwhile, pushed up 15.7 to 2,084.7.

Mr Greenspan's comments on the impact of the recent global economic and political turbulence on the US economic outlook were interpreted by many observers as increasing the chances of a loosening of US monetary policy in the short term.

Meanwhile, hints that a reduction in UK interest rates might now be a lot closer saw sterling under sustained pressure, easing the burden on the beleaguered engineering/export stocks which have had to endure severe pain over recent months.

Turnover in equities yesterday was a lowly 735 million shares.