The news of the proposed merger between Glaxo Wellcome and SmithKline Beecham took London's equity market by storm, producing massive gains in both stocks and in the rest of the drugs sector, and fuelling another move to record levels by the FTSE 100.
The blue chip index leapt past 5,600 to hit an intra-day record of 5,616.1, up 157.6, before easing off slightly to finish the session 140.5 higher at 5,599.
That performance was the Footsie's fourth consecutive closing record and its sixth successive rise.
Over those six sessions, the index has risen 417.6 points, or 8 per cent, as the British market has responded to the build-up of takeover news, both actual and rumoured, culminating in the proposed deal between Glaxo and SmithKline - at £118 billion sterling, the world's biggest-ever merger.
But there were other positive forces at work in the equity market yesterday, notably the return of many of the Asian stock markets after the Chinese new year holiday.
The Hong Kong market, along with Tokyo the most important of the Far Eastern stock markets, kicked off its first trading session of the new year with a 14 per cent gain, while Tokyo nudged ahead and Thailand and Singapore both posted rises in excess of 12 per cent, adding to the feelgood factor sweeping European markets.
Also on the positive side, the day's domestic economic news, which included a subdued purchasing managers' survey, was seen as increasing the likelihood that the monetary policy committee, which meets on Wednesday and Thursday, will leave interest rates on hold for the time being.
As well as the British meeting this week, global markets have to negotiate interest rate decisions in the US, where the Federal Reserve open market committee meets, and in Germany.
Although the pharmaceutical stocks held centre stage, there was more takeover activity among the small caps, which have attracted a spate of bids in recent weeks.
The market's second liners, represented by the FTSE 250, were left almost for dead by the leaders. The 250 index finished the day up only 16.9 at 4,878.4 and the FTSE SmallCap 12 firmer at 2,384.7; the latter is now only 22.7 points below its previous record close.
No less than three takeover stories were unveiled, involving Gibbs Mew, the pubs group, La Senza, the retailer, and Tele-Cine Cell, which provides special effects for film companies.
The expected opening surge on Wall Street helped London maintain its earlier progress. The Dow Jones Industrial Average rose 50 points not long after trading commenced and was 164 points ahead an hour after London closed, while the S & P 500 index broke through the 1,000 barrier for the first time.
Turnover in equities was 825 million shares, but action in Glaxo Wellcome and SmithKline was predictably high, accounting for well over 10 per cent of the total.
