Equities were also supported by more surveys pointing to a yes vote in the French referendum on the Maastricht treaty.
However, the apprehension in the foreign exchange and equity markets remained rooted as sterling inched closer to its band floor in the exchange rate mechanism.
Trade Indemnity, the credit insurance group, warned that a rise in interest rates would hamper efforts to bring down the rate of business failures.
Pentland Industries, the sportswear company that owns Adidas, reported a 228 per cent rise in pre-tax profits to pounds 19.7m for the half-year to June, helped by an increase in interest income on its pounds 270m cash pile from pounds 500,000 to pounds 14m.
Rover, the British Aerospace subsidiary, joined the car price war by offering savings of more than pounds 1,000 on some models. The move followed disappointing figures for new car sales in August.
On Tuesday, the pharmaceuticals group Glaxo moved to soothe fears about the side-effects of its new migraine drug, Imigran, following complaints of chest pains from some patients who have taken the drug. Analysts believe the drug has the potential to yield annual sales of pounds 500m.
Shares in Fisons fell 24p to 150p after it announced lower than expected interim pre-tax profits of pounds 40.4m, compared with pounds 95.2m last time. Profits from pharmaceutical products fell 66 per cent.
The pound was put under further pressure after Finland devalued its currency, the markka, by 12.3 per cent.
Then on Wednesday, it was forced down to its lowest-ever level in the ERM, at 2.7812, after the Italian government called for emergency powers to defend the lira in the foreign exchange markets. The gap between low US interest rates and the high level of German interest rates undermined currencies.
More evidence of the crisis in the UK construction industry was provided by Taylor Woodrow when it slashed its interim dividend from 1.86p to 0.5p on the back of pre-tax losses of pounds 16m ( pounds 25.3m profit last time).
From Toronto, Olympia & York Developments was reported to be seeking a two-month extension of its bankruptcy protection, which runs out on 27 October, to finalise its restructuring plan and obtain creditor approval.
Any hopes of a consumer-led recovery were pushed aside after the Confederation of British Industry reported on Thursday that high street sales had worsened in August. The CBI also warned that the sharp reduction in orders by retailers and wholesalers noted in July had continued in August and was likely to affect the manufacturing sector.
It emerged that the damage caused by Hurricane Andrew in the US was expected to cost the Lloyd's insurance market between pounds 450m and pounds 500m.
BTR kept the recessionary pressures at bay to achieve increased pre-tax profits of pounds 548m ( pounds 512m) for the half- year to 30 June, helped by the successful integration of Hawker Siddeley, which it bought last year.
On Friday, official inflation figures showed prices in the year to August had risen by 3.6 per cent, the smallest annual increase for four years. This helped the FT-SE 100 index of leading shares to gain 30.3 points on the day. The improved figures failed to lift the pound in the ERM.
The construction and building materials group Tarmac announced it was closing four plants and cutting a third of its brick production and a tenth of its concrete block output.Reuse content