Shares ended the day showing modest gains after a volatile session which saw the FTSE see-sawing up and down.

The FTSE 100 Index of top shares finished up 14.4 at 5231.5, but at one stage during the morning it was showing a hefty 111.9 point gain at 5,329.

A flurry of deals kicked the morning off briskly, although a mixed set of official figures showed the trade deficit with countries outside the EU was worse than expected last month.

However, trade within Europe was far more healthy than expected, leaving dealers split over the figures' significance for interest rates.

Weekend talk of cuts in European interest rates led to an improvement in continental markets, which gave some buoyancy to the City.

An early charge by banks and insurance groups was replaced by a surge in telecoms stocks after several brokers gave them a mention in morning briefings.

Demand for mobile phones is expected to be high in pre-Christmas trading, and Vodafone and Orange charged ahead by 3p to 760p and 25p to 566p respectively.

Cable & Wireless also did well, leaping 17p ahead to 650p, while Colt Telecom gained 20p to 665p after reporting increased sales in its most recent quarter.

Banking analysts welcomed news of a merger on the other side of the Irish Sea as two of Ireland's biggest financial groups announced they were in talks.

If Irish Life and Irish Permanent merged, they would become the country's third biggest bank but would dash Abbey National's rumoured hopes of taking over Irish Permanent.

Irish Life jumped 64.5p to 529.5p and Irish Permanent leapt 105p to 882.5p.

Abbey National fell back after a strong start, but still finished up 6p at £11.40.

Expectations of a takeover bid for telecoms group Ionica led the company up 20% in furious early trading.

Ionica reached 17.5p before the company asked for its shares to be suspended pending an announcement.

Independent tenanted pub and hotel operator Enterprise Inns, up 2p at 276.5p, took over Mayfair Taverns Limited at a total cost of £37.4m.

Construction group John Laing blamed unexpected costs in the building of the Cardiff Millennium Stadium for a multi-million pound hit to its bottom line this year - shares dived 36p to 303p.

Distributor Booker announced a further stage in its bid to focus down to food distribution with the sale of its fish processing operations for £47.5m.

Shares gained a penny and a half to 125.5p.

Retailer Kingfisher announced a £750m push into the DIY market, driving shares up 10p to 524p.

The move is expected to create 20,000 jobs.

Yorkshire Water bought a Dutch biochemicals group for £15.5m but analysts shrunk from the deal, leaving shares down 4p to 515p.

Speciality chemicals group W Canning agreed an £88.9m bid from US company MacDermid - but analysts warned against the idea that merger and acquisition activity is returning to the sector.

Canning rose 21.5p to 290p, although there was little excitement amongst other companies in the field.

Laporte rose 4p to 537.5p but BTP was unchanged at 367.5p.

Norwich Union, up 5p to 437p, applied for a licence to establish a pension company in Poland.