The FTSE 100 index overcame a poor performance from its largest constituent, Vodafone AirTouch, to record a modest closing gain.
Vodafone's 12p decline was worth 30 points off the blue-chip benchmark, while stocks going ex-dividend took off a further eight points.
But the Footsie still closed 24.3 points higher at 6,387.8 and at one stage even climbed briefly above the 6,400 level.
Sentiment was boosted by strong international markets, with continental European and US investors seemingly hopeful that the US Federal Reserve will not raise interest rates following last Friday's non-farm payroll figures.
The Dow Jones Industrial Average and the Nasdaq were both higher when London closed for trading, and the strength of Nasdaq helped some leading UK technology stocks. Bookham Technology was the Footsie's best performer ahead of results this week.
Oil stocks were generally stronger after the crude price nudged briefly above $30 per barrel in Asian trading. Banks also moved ahead, with some takeover speculation revolving around Woolwich just ahead of the close. TeleWest, meanwhile, surged on hopes of a bid despite a denial from Callahan, the predator cited in weekend press reports.
Apart from Vodafone, the other big loser was Nycomed Amersham, which slipped 7.65 per cent despite confirming plans to float its AP Biotech subsidiary on Nasdaq.
The FTSE 250 gained 17.5 to 6,732.7 and the Techmark 100 rose 11.28 to 3,487.09. The SmallCap index, however, fell 1.4 to 3,382.3.
June figures on UK manufacturing output and industrial production were slightly stronger than expected, with the former growing 0.2 per cent and the latter 0.1 per cent on the month. The figures contrast with recent gloomy surveys from the Confederation of British Industry.
The Halifax house price index for July showed an 0.3 per cent rise on the month, bringing the annual gain down to 8 per cent from 9.2 per cent in June.
Neither set of statistics seemed likely to move the interest rate argument decisively and investors will focus on the Bank of England's quarterly inflation report tomorrow. The bank's monetary policy committee has left rates unchanged for the last six months.
"We now believe that UK interest rates have peaked at 6 per cent and could be falling by the year-end. With interest rates set to rise further in the US and euro zone, the relative outlook for UK equities is becoming more positive", said Mr Steve Russell, UK strategist at HSBC.
"It is too early to move overweight industrials. Defensives will continue to outperform, along with old growth sectors. We favour transport, beverages and water sectors plus defensives with growth characteristics," Mr Russell added.
Turnover was fairly modest, befitting a Monday in August, with 1.11 billion shares traded by the 6 p.m. count. A little more than 84,000 deals were conducted.
