The FTSE 100 index raced past the 6,500 mark yesterday on optimism about interest rates on both sides of the Atlantic.

The UK average earnings numbers for April, released at 9.30 a.m., were just what the market wanted to see. Annual earnings growth over the three months to April was 5.1 per cent, well below the 5.5 per cent that most economists expected.

Given that the pace of earnings growth was one of the factors that had been causing most concern to the Bank of England, the figure was seen as sharply diminishing the chance that the bank would raise interest rates in July. Indeed, there were hopes that the next move in UK rates might be downwards.

The balance of buyers over sellers of UK equities was 22 percentage points, the highest figure since October 1998, with managers generally planning to run down their cash holdings to buy stocks.

Yesterday's UK data also eased pressure on the manufacturing sector, as the pound fell against the dollar and the euro. Sterling's trade-weighted index dropped from 104.2 to 103.4, its lowest level this year. As recently as May 3rd, it was 113.6.

Base rate optimism in the UK was matched by another set of encouraging data from the US, where consumer prices rose just 0.1 per cent at the headline level in May. That statistic gave further weight to the view that the Federal Reserve would not need to raise interest rates when its open market committee next meets on June 27th and 28th.

All this meant that the FTSE 100 was always in positive territory during the session. One minute before the close, it looked as if it would notch up a three-digit gain, but a late flurry of trading left the blue-chip index up 89.2 at 6,536.3.

The other indices were also higher, but the gains were more subdued. The FTSE 250 rose 14.0 to 6,489.4, while the SmallCap gained 8.6 to 3,318.6. The Techmark 100 index of leading tech stocks recouped some of Tuesday's losses and ended 26.53 ahead at 3,372.94.

Telecom, media and technology stocks were among the best performers in the FTSE 100. The media sector in particular was lifted by news of the potential tie-up between Vivendi, Seagram and Canal Plus.

But the rising tide did not lift all TMT boats. Dot.com heavyweights such as Freeserve, hit by a broker downgrade, and auctioneer QXL lost ground.