Investors were evidently refreshed by the May bank holiday weekend since they returned to their desks and immediately sent the FTSE 100 index past the 6,000 level.
But the rain that swept across London seemed to depress traders' spirits and the market lost much of the early ground in the afternoon. At the close, Footsie was 15.1 points higher at 5,970.7.
Footsie recrossed the 6,000 level in the first few minutes of trading on the back of some programme trading. The high for the day was 6,042.6, up 87 points.
The international background proved supportive. With the exception of Korea, Asian markets were generally calm and several European bourses had recorded all-time highs while London was closed on Monday.
Wall Street, having opened strongly, put in a fairly patchy performance during the London afternoon.
The benchmark 10-year gilt was around half a point higher at the close, helped by a Barclays forecast that base rates - currently 7.25 per cent - will fall to 5.5 per cent by the end of 1999.
However, the market may have been inhibited by a sharp rebound in sterling which gained nearly three pfennigs against the deutschmark to carry it back close to the DM2.90 level.
Mr Bob Semple, market strategist at BT Alex Brown, said: "I think the market is moving sideways at the moment. The pay data has clearly taken a turn for the worse and that implies no early cut in interest rates and a squeeze on margins. There could be some profit disappointments to come. Having said that, the supply/demand balance still looks favourable for shares and any downside looks limited."
Once again, the FTSE 250 and SmallCap indices surged ahead to set new peaks. The 250 index ended at an all-time intra-day and closing high of 5,920.9; the SmallCap gained 4.3 to a closing high of 2,792.7. The FTSE AllShare index, heavily weighted towards Footsie stocks, rose 7.73 to 2,841.04.
There was more bid-related dealing surrounding the Mirror Group, which revealed that it had been in talks with Trinity, the regional newspaper group. Discussions have now halted.
Other media stocks in the limelight included Pearson, which owns the Financial Times, and United News & Media. The two stocks were the best performers in the Footsie.
If Footsie, which has failed to regain its early April peak, is stuck in a trading range of 6,105.8, then stock-picking will be all the more vital for managers seeking to improve performance.
Analysis by Dresdner Kleinwort Benson shows that British pension funds have been taking some pretty heavy sector bets on the market.
They have more than twice the sector weighting in oil exploration stocks and are also heavily biased towards the paper, property, building materials and gas sectors. The big underweight positions include other financials, household goods, support services and retail banks.
Volume was 693.6 million shares by the 6 p.m. count, of which 56 per cent was in non-Footsie stocks.
