A day of high drama in London's equity market saw the FTSE 100 index run to the very brink of the 5,000-level, falter, and then retreat over 100 points before stabilising.

"Extreme volatility is usually viewed in the stock market as the forerunner of a big fall, and we have had plenty of volatility today," said one senior marketmaker, exasperated with recent violent shifts in sentiment.

That volatility saw the FTSE 100 swing through a 150-point arc yesterday, with an early derivatives-linked upsurge subsequently wiped out and replaced by a three-figure plunge as Wall Street staged a startling about-turn.

Yesterday's performance provided a thrilling climax to a week in which the FTSE 100 had broken through the 4,900 level and launched a series of determined attacks on 5,000.

The main driving forces behind London were the seemingly relentless advance by Wall Street, plus a build up of liquidity among investing institutions, and actual and rumoured takeover and merger activity in the UK.

Wall Street drove through 8,000 on the Dow Jones Industrial Average in mid week before turning easier on Thursday evening and falling heavily yesterday.

The Dow was down over 145 points shortly after the opening on US markets yesterday, with traders citing disappointment with second-quarter numbers from Microsoft as the main depressant.

At the close, the FTSE 100 was left nursing a 71.8 or 1.4 per cent decline at 4,877.2.