FTSE 100 Index: 3,769.2 (+13.5);, FTSE Mid 250 Index: 4,467.4 (+5.1)

WIDESPREAD relief that the session's daily dose of economic news, from the US and Britain, was good gave a boost to both stock markets. London settled at the day's best, having gained in confidence as Wall Street opened in good heart.

Observers were by no means totally convinced of the equity market's underlying confidence, pointing to the persistent unease in the gilts market. The 20 year gilt gradually picked up from an initially depressed level but still closed marginally easier on the day.

Dealers said the market was eager for details of the Chancellor of the Exchequer, Mr Kenneth Clarke's annual speech at the Mansion House last night.

Posting its third straight gain, the FTSE 100 index closed a net 13.5 higher at 3,769.2. There was again much less enthusiasm for the second line stocks, where the FTSE Mid 250 index could manage only a 5.1 improvement to 4,467.4.

Market optimists were quick to pounce on the resurgence of take over speculation in various sectors, principally the pharmaceuticals, where the leaders were all aggressively bought, partly on bid talk but also because of fundamental re ratings by top analysts.

Pearson, the media group, was another FTSE 100 stock to make rapid progress in the wake of revived hints that a straight takeover or break up bid could be in the offing.

The bid buzz was tempered somewhat, traders said, but the ever present worries that a large scale rights issues at liable to hit the market at any time.

Economic details on unemployment, average earnings and unit wage costs in Britain were all seen as benign and as strengthening the chancellor's position after his move to cut interest rates last week. Mr Clarke came in for widespread criticism, with many observers adopting the view that his motives were politically inspired.

The US inflation news was welcomed on Wall Street where US Treasury bonds managed minor gains, after worrying the market earlier this week. The Dow Jones Industrial Average had no problems with the inflation number, making good progress at the outset and posting a 25 points gain shortly after London closed for the day.

Customer business on Tuesday, at £1.38 billion sterling was slightly higher than Monday's and greeted with dismay by dealers.

The market's guesses as to the changes in the FTSE 100 index, effective from Monday, June 24th, were broadly correct. United News & Media, Orange and Next were elevated to premier status, while Foreign & Colonial, Greenalls Group and Rexam were relegated to the FTSE Mid 250.