At one time the FT-SE 100 index was down 22.4 points as the market fretted about the latest tribulations of the Tories and the possibility they will be forced into calling an early election.
Then, despite the continuing budget deadlock, New York sniffed the possibility of lower interest rates and romped ahead.
It was enough to leave Footsie at 3,687.9, a 1.4 deficit.
Takeover speculation was surprisingly muted although Ladbroke, the betting and hotel group, was back in the frame, up 9.5p at 156p as the fierce battle for Forte became even more intense.
Whitbread's proposed budget hotels and roadside restaurants deal with Forte must rule the brewing group out of any Ladbroke action and those betting on a bid are refocusing on Bass, known to be keen to increase its hotel spread.
Forte jumped 12.5p to 343p; Granada fell 3p to 642p and Bass held at 719p.
Allders, the department store chain, was another to attract takeover talk, up 7p to 175p.
P&O was also higher on the back of possible bid action gaining 8p to 484p, and Pearson attracted support, up 11p at 635p, on the theory that should Granada fail to capture Forte it could turn its attention to the banking and media group.
There was a frisson of excitement among insurance brokers as it became known that the Aon insurance giant had raised $1.2bn through the sale of two life insurance companies.
Aon is known to want insurance brokers and its comment that it was planning acquisitions was enough to boost Sedgwick and Willis Corroon. Sedgwick gained 6p to 127p and Willis 5p to 146p.
At one time Aon was thought to be keen on Bain Hogg, the Inchcape insurance offshoot. But Inchcape's decision to float the company seems to kill off any such ambition - at least until Bain is independent.
Insurance were mixed although Prudential Corporation improved 9p to 424p following a new year tip from ABN Amro Hoare Govett.
Retailers managed a smattering of gains, largely on the back of favourable comments about holiday trading. But food retailers were unsettled by growing evidence of a price war with J Sainsbury, which has launched the new cuts campaign, off 2p at 391p.
Bowthorpe, the electrical components group, tumbled 9p to 411p after NatWest Securities trimmed its profit forecasts from pounds 78.5m to pounds 77m and from pounds 88m to pounds 84.5m.
Airtours, the holiday group, was dull, off 6p at 361p, on reports that the packaged holiday season had got off to a slow start.
United Utilities, the first electricity and water utility, made a drab start. The North West Water/Norway combination fell 7p to 609p. It is listed by the Stock Exchange as a water company.
Banks suffered from profit-taking. Lloyds TSB lost 12.5p to 319p and Royal Bank of Scotland 4p to 582p.
The deluge of new year tips produced one telling response. Zergo, involved in anti-computer hacking software, soared 80p to 250p although there was no record of any transactions. The shares arrived on AIM at 97.5p.
Allied Domecq gained 12p to 537p and Pet City 13p to 395p. Filtronic Comtek, last year's top-performing tip, fell 33p to 463p following sell advice.
Shield Diagnostics, the health care group, fell 11p to 151p, possibly on disappointment it had failed to feature strongly in the tips parade.
Vodafone, lost 4.5p to 226p, as its connections at Christmas came out at 143,000, against market hopes of up to 170,000.
ADT, the Bermuda-based group run by Michael Ashcroft rose 62p to 945p ahead of an after-hours announcement it had sold its UK and European car auctions business for pounds 209m. It will use most of the cash to expand its US security operations.
Telecom Europe, acquiring from Firecrest, distribution and marketing rights for Internet transphone, a telephone handset, in Austria, Germany and Switzerland, held at 50p. Firecrest, which could end up with 16.5 per cent of Telecom, slipped 3p to 119p.
South Country Homes shaded to 24.5p as shareholders with only 4 per cent of the capital accepted the 20p-a-share cash offer from Hambros Bank. The bid was made after the arrival of former Cope Allman chief Richard Grogan who acquired 27.9 per cent.