Shares closed higher on the day, butt off best levels after Wall Street failed to hold early gains.

Optimism that the Bank of England's Monetary Policy Committee meeting will result in interest rates being frozen boosted confidence, dealers said.

The FTSE 100 index closed 56.1 points higher at 5898.4, while the FTSE 250 ended 22.8 up at 5920.4 and the FTSE Small-Cap closed 6.6 better at 2769.1.

3i Group saw a hefty gain of 34 1/2p to 650p as traders warmed to the prospect of results on Thursday.

Asda Group rose 7 to 188 1/2 after Dresdner Kleinwort Benson said 'buy', while Vodafone Group jumped 26 1/2 to 739 1/2 in the wake of Tuesday's results.

Analysts revised pretax forecasts upwards, and raised their share price targets.

ABN Amro lifted its 1998/99 pretax forecast to £860m from £850m and its 1999/2000 pretax outlook to £1.19bn from £1.07bn.

Analysts at Dresdner Kleinwort Benson also stepped up their forecasts and set a 780p per share target price on the stock and retained its "add" recommendation, arguing that the group's "quality businesses and management" will see further gains.

Railtrack closed 41 higher at 1310 after news of a 12.1% increase in annual profits.

Boots rose 17 to 955 1/2 awaiting Thursday's results, but Compass Group dropped 21 to 1216, and Pearson 41 to 1145 as profit-takers moved in.

Siebe dropped 20 to 1340 as profit forecasts were cut by a number of leading analysts following the group's full year results.

ABN Amro cut its year to March 1999 pretax profits forecast, saying it was cautious about the stock in the short term but in the longer term was more positive.