FTSE loo Index: 3758.6 (+3.0); FTSE Mid 250 Index: 4376.8 (-8.5)

"DON'T worry, be happy" was the motto of the day in the London stock market yesterday, as investors shrugged off Monday's 88 point fall on Wall Street. By the close, the FTSE 100 index had managed to record a modest three point rise.

With many in the City enjoying an extended Easter break, trading was light. Market makers reduced their prices at the opening, with the result that Footsie started the day 29.4 points lower at 3,726.2. But that proved to be the index's worst level and, with little sign of selling pressure, the market steadily reduced its losses.

The US decline was prompted by March's stronger than expected non-farm payrolls figure, which was published on Friday when London was closed. But over the Easter break, investors may well have remembered that the US equity market, having fallen 171 points in response to February's strong payroll data, rebounded to reach an all-time high last Wednesday.

British investors accordingly seem to have decided that the best way to deal with Wall Street's volatility was the age-old tactic of parents of children prone to temper tantrums - ignore them in the hope they'll quickly stop. Mr Bob Semple, British market strategist at NatWest Securities, said: "Hundred point swings on Wall Street have become a regular feature. The British market reacted sensibly given that its fundamentals were still reasonably sound, earnings and dividends are still growing."

Mr Tim Brown, British market strategist at UBS, added: "Short-term technical factors were supportive. Unit trust managers took in a lot of money before the end of the year from personal equity plans and that has to be invested. Institutions are still sitting on quite a lot of cash from takeovers, and given the continued bid speculation, are reluctant to sell."

The continued weakness of manufacturing output, which was unchanged in February, raised some hopes that base rates might be cut further - there was a modest rally in short sterling futures - giving some support to British equities.

A further round in the mortgage price war, with a cut in rates from the Nationwide building society, and talk about a wide spread of takeover targets, also helped sentiment.

Wall Street stabilised when it opened in London's afternoon, with the Dow only five points lower when British trading closed.