London's leading shares have continued to surge as a better-than-expected Christmas for some retailers and a strong performance on Wall Street lifted the FTSE 100 above the 6000 level.

The leading index was up 9 points to 6052, just 130 points below its all-time high, in the first hour of trading.

Shares in clothing retailer NEXT were up 5% after the company revealed that Christmas sales were up 17%, or 2.5% on a like-for-like basis.

Shares in insurance companies surged after broker upgrades, with Norwich Union, CGU, and Royal Sun Alliance all gaining.

Shares in Allied Carpets took a knock after the company said that it was ending talks on a possible takeover. They were down 11% to 42.5p. The company will complete the disposal of its Carpetland stores in January.

Profit-taking hit pharmaceutical shares after strong gains yesterday.

The market took little notice of a growing view that the Bank of England will hold UK interest rates steady at this week's monetary policy committee meeting, rather than ease policy as many have been hoping. A rate announcement is due at midday Thursday.

Telecoms were again the market's shining light, as shares were puffed on the back of strong subscriber figures unveiled by Vodafone and Orange and by news that the former is bidding for a trans-Atlantic tie-up.

Vodafone admitted that it is in talks with US telecoms group AirTouch about a merger. AirTouch has already been the subject of a $45bn bid from Bell Atlantic.

Vodafone shares advanced 30 pence to 1140p, also helping to lift Orange and Cable and Wireless.

Meanwhile, bid talk swirled around LucasVarity, which said it was in strategic talks with a number of a companies, after reports it is in deliberations with TRW and Tenneco. The engineer gained 1.7%.