The FTSE 100 yesterday pushed through 5,400 points on the London Stock Exchange for the first time in four years.
The blue-chip index rose 32.2 points to 5,415.7 - a level last seen in August 2001 - within a few hours of the market opening and then closed up 24.4 points higher at 5407.9.
Takeover speculation was the main feature as investors mulled the next likely target in a market which has been rife with rumours of bids for several stocks.
Banks, utilities and telecoms companies were particularly closely watched.
Richard Lake, a technical analyst at stockbroker Brewin Dolphin, said the market was due a breather following its strong gains but added that momentum could also take the FTSE to 5,500 to 5,750 points in the next 1-2 months.
Analysts said money was being drawn into equities from relatively unattractive fixed income markets.
"Fixed interest markets look so expensive that if they don't break I don't think equities will," said John Smith, investment director at Brown Shipley.
"What we see in the last few months is real yields on bonds have declined, so although we've seen inflation pressures there's been no major hit on bond markets - so on a relative basis equities look far more attractive than fixed interest markets."