The start of what could be a momentous week for London's stock market saw share prices gallop ahead on the back of ever-growing confidence that another domestic rate cut is imminent.

Helping the London market build on its recent buoyant mood was another powerful showing by Wall Street which, following last Friday's near 100-point gain on the Dow Jones Industrial Average, posted another three-figure rise shortly after the opening bell yesterday.

On top of the prospect of another local interest rate reduction, institutional buyers were enticed back into the market by takeover and corporate stories.

Global market bulls pointed to the possibility that central banks in both France and Germany, meeting on Thursday morning, could signal rate cuts in those countries, moves which are expected to be followed up by the Bank of England at midday the same day.

The FTSE 100 index settled 87.1 higher at 5,525.5, extending its rise over the past three trading sessions to 231.6, or 4.4 per cent.

Mr Gordon Brown, Chancellor of the Exchequer, is due to reveal his pre-budget statement today, which commentators expect to include a Treasury downgrade of its domestic economic growth forecast for the current year, down from 1.5 per cent to 1 per cent.

The takeover/corporate activity stories involved many of the UK market's front line stocks. Williams Holdings held top spot in the FTSE 100 for much of the day after a report that Tyco International, a leading US Group, had held talks with the company.

There was also growing talk that a takeover move in the financial sector was being prepared.

Turnover in equities was again disappointing, reaching only 832 million shares by 6.p.m.