BRITISH shares shrugged off early nervousness triggered mostly by a weak showing from global bonds. Dealers preferred instead to focus on the latest flurry of takeover rumours.

The rumours were again mostly concentrated in the financial areas of the market and specifically in the insurance sector which is gathering itself for next month's flotation of Norwich Union.

Just as the banking sector was set alight by the much better than expected flotation of Alliance & Leicester, the big insurance stocks have been attracting strong buying interest on the view that Norwich shares will perform similarly.

There was also talk that unofficial "grey market" dealings had commenced in the Halifax building society. The shares were said to have been initially quoted above 700p.

At the close of trading, the FTSE 100 was 9.8 higher at 4,651.8, completing a good recovery which saw the index recoup an early 18.5 decline.

The FTSE Mid-250, meanwhile, closed at the day's lowest point, up 1.1 at 4501.5, after a session high of 4,508.3. weakened by the sharp fall in transport stocks

British dealers were surprised at London's resilience in the face of another poor performance by gilts, which extended opening losses and closed under some serious downside pressure.