Sentiment in London's stock market took a turn for the better yesterday, with dealers and investors encouraged by Wall Street's rally at the close of trading overnight and good performances from the two leading Asian markets, Tokyo and Hong Kong. Wall Street also came in on a firm note yesterday helping London settle around the day's best levels.

At the close of the session, the FTSE 100 was 62.8 higher at 6,180.8, reducing the decline over the week to one of 64.3, or 1 per cent, while the FTSE All-Share index, up 25.2, was 20.62, or 0.7 per cent lower on the five-day period. The outstanding performance of the week came from the FTSE SmallCap, which recorded its seventh consecutive gain, moving up 5.9 to 2,757.4, up 31.19, or 1.1 per cent over the week. The FTSE 250 index rose 16.7 to 6,015.8, extending the rise on the week to 28.7, or 0.5 per cent.

The market's confidence was given a big boost by confirmation of rumours circulating earlier in the week of a three-way merger of Japan's Industrial Bank of Japan, Dai Ichi Kangyo and Fuji Bank, which was being viewed as part of the continuing consolidation in global banking, with more big mergers, possibly involving UK banks, on the cards.