London stocks continued to build on their recovery and resisted worrying comments from two areas: industry and the Bank of England.
The FTSE 100 index finished the day a net 17.9 up at 5,056.3. However, it was unable to hold on to its best level, which had seen it push through 5,100 and reach a session high of 5,125.6. Dealers said the underlying tone of the market was much more positive.
They pointed to the excellent performances of the middle and smaller capitalised stocks, with both the FTSE 250 and FTSE SmallCap indices closing at the day's best levels.
The 250 ended 63.4 firmer at 4,469.7. The SmallCap settled 18.8 to the good at 1,868.2.
The latest quarterly report from the British Chambers of Commerce painted a gloomy picture of the domestic economy, with the manufacturing sector "moving into recession".
It joined the chorus calling for a further reduction in British interest rates. The survey was followed by comments by Mr Eddie George, governor of the Bank of England, to the parliamentary treasury select committee, noting that financial fragility had "increased enormously" over the past few months and that the downside risks to growth had "undoubtedly increased".
Mr George warned of the risks to the stability of financial institutions if there was another failure like that of Long-Term Capital Management, the US hedge fund. However, he insisted an investigation by the British Financial Services Authority had not turned up anything alarming so far.
Those two timely reminders of the problems caused by the financial crises across the globe cut into the early strong gains recorded by London's leading stocks.
But the increased prospects of a further reduction in domestic interest rates after the recent inflation and earnings data provided sufficient encouragement for investors to keep their nerve.
The line was held, apart from a late-afternoon flurry of selling that threatened to leave the FTSE 100 down on the day. That was caused by initial uncertainty on Wall Street after a larger-than-expected 0.3 per cent increase in US producer prices last month.
Optimists in London are hoping that the inflation level will enable the Bank of England's monetary policy committee to reduce interest rates again in the short term.
A poll of equity market strategists from leading global investment banks and stockbrokers carried out by CNBC, the business television channel, suggested the FTSE 100 had already bottomed out. By contrast, the strategists believe Germany's Xetra DAX and the Dow Jones Industrial Average are set to drop further.
There were, however, plenty of downside performers as the market remained anxious about the potential for more earnings downgrades and profit warnings. Turnover in equities continued at relatively high levels. A broker's "buy" recommendation for Orange put a spark back into the telephone sector. Orange raced up 27p to 537p, Colt Telecom rose 57p to 587p, Vodafone Group lifted 3p to 710p and Securicor, which is a shareholder in Cellnet, jumped 25p to 375p.
The end of a long-running contract with the electricity companies combined with the mild weather at the start of the year to slash profits at coal business RJB Mining.
But the company said the government's recent White Paper on energy strategy had provided a welcome boost to the coal industry which brightened the outlook for the company. This did little to impress the market as the mining group dropped 6 1/2p to 79p.
Meanwhile, former TV executive Mr Michael Grade is to step down as chairman of entertainment group First Leisure Corporation so he can concentrate on managing the business.
Mr Grade, who was executive chairman, becomes chief executive with immediate effect. The firm dropped 4p to 171p.
