LONDON stocks pushed forward to surprise the pessimists and leave last Friday's slide no more than a misty memory. A rush of genuine buying, which partly reflected US interest, partly takeover speculation and partly year-end restructuring of portfolios, saw the FTSE 100 index gain 24.1 to 4,035.7.
That rise, combined with Monday's 48.6 point gain, almost made up for Friday's fall, which was prompted by cautious comments from Mr Alan Greenspan, the chairman of the US Federal Reserve.
With the Dow Jones Industrial Average up by 82 points overnight, London opened with a fair wind behind it. And, as most dealers had spent Monday filling in short positions, Wall Street's example was almost certain to squeeze prices higher.
Also, earlier worries began to recede. Strategists decided that Mr Green span's earlier comments reflected nothing more than the market consensus that interest rates have to rise.
They said hikes in the US and Britain had both been factored into prices.
Additionally, any prospect that the Chancellor of the Exchequer, Mr Kenneth Clarke might choose to increase rates following today's meeting with the governor of the Bank of England, Mr Eddie George faded away.
A rise so soon after the Budget would be seen as a sign that the Chancellor had failed to tighten fiscal policy sufficiently. And the latest British Retail Consortium survey showed retail sales growth was beginning to slow, adding to Monday's benign producer price data. Consequently, government bonds were strong throughout the day.
In the afternoon, Wall Street opened up again and proved ahead by more than 30 points to prompt a rush of buying in British futures, which in turn supported prices in the cash market.
At the close, Footsie was back within striking distance of its previous peak - 4,073.1 - achieved in October. Meanwhile the FTSE Mid-250 index gained 26.9 to 4,411.9. There was some talk that the market was being overly complacent. On the other hand valuations - whether against bond yields or cash - are reasonable, and nowhere near the danger levels seen in 1987.
In fact, dealers who arbitrage between British stocks and their New York equivalents noticed genuine US buying.
This overseas interest combined with recurrent takeover speculation. Rumours of a big move, particularly within the financial sectors of the market. have been prevalent for some time. BAT Industries and Abbey National both had an early Christmas sparkle.